The Existing Commodity Sales Tax System and the Proposed Indian GST: An Analysis Using Mclure's Ideal Sales Tax System

A sound tax system plays a vital role in the development of public finances of any country. So, each country tries to achieve it with the help of various reforms, which take place according to its economic, political, and financial considerations. The GST (Goods and Services Tax) has been proposed for implementation in India. Since its announcement, it has attracted a great debate on why we need GST if we have CENVAT (Central Value Added Tax) and State VAT (Value Added Tax). This paper presents an analysis of both - the existing commodity sales tax system and the proposed GST with the help of Mclure's ideal sales tax system and finds that the proposed GST fulfills most of the principles of Mclure's ideal sales tax system in comparison to the existing commodity sales tax system, which lacks all principles. The findings from this study favor the implementation of the proposed GST for India.