GST in Canada

This is with reference to your editorial entitled “Against the States’ Interests” (EPW, 25 July 2009) which touched upon the goods and services tax (GST).

The case of Canada shows similarity with conditions in India because of the diversity and fiscal autonomy assigned to the provinces there. After much contention, all the provinces in Canada have joined the GST bandwagon, but under terms set individually. For example, a few provinces merged their provincial sales tax with the newly introduced GST, thereby forming a harmonised sales tax (HST) on goods and services. The HST functions exactly like the national level GST, but is at 8 percentage points above the uniform 5% GST rate. I personally see a condition such as this being replicated to some extent in the case of the proposed dual GST in India. I recently came across a write-up that mentioned how Gujarat levies an additional tax on the uniform value added tax (VAT) rate, Kerala levies an additional cess, while Goa levies an additional entry tax on the uniform VAT rate. I am at a loss to understand how interstate matters would then be treated for refunding input tax credit claimed by manufacturers.