country in the world practises such suicidal taxation.
Revenue gain from inter-state sales tax is illusory. For the
importing States it is an iniquitous encroachment on their tax room as is
evident from the fact that States with only 20 per cent of the population hogs
45 per cent of the revenue from CST. For the States of origin it is
essentially tax on exports that inhibits their economic growth and so their tax
potential and, in any case, cannot be sustained very long with the opening up
of the economy. The question of revenue loss can be tackled by enlarging
the tax base of the States as suggested in the NIPFP report. The reforms
however should come in a package, balancing the gains and losses. Piecemeal,
they may not go far, on the contrary, may block the chances of further
movement forward.