Today consumers have no idea about the extent of taxes they pay on goods. If you get a bill after buying merchandise which gives the extent of VAT you have paid, it is an understatement of the actual tax you have paid. Remember, well before merchandise reached the retail outlet, the central government has collected excise duty. The extent of excise duty is not mentioned in the bill.
Therefore, today it is reasonable to assume we pay well over 20% tax for most merchandise we buy.
In GST, consumers should benefit in two ways.
First, all taxes will be collected at the point of consumption. It means that if a shirt is taxed at 18%, it will include both central government’s taxes and state government’s taxes. Transparency in taxation should deter governments from indiscriminately increasing taxes as there is bound to be public backlash.
Second, once barriers between states are removed, we as consumers will not end up paying “tax on tax” which is what happens when goods move across state borders.
