The GST roll out will prove to be a revolutionary step and has potential to transform the "fiscal architecture" of the government, Minister of State for Finance Jayant Sinha said on Thursday.
"In some ways it is as revolutionary and as profound as what happened in 1991 because it is changing fundamentally the manner in which the Indian government functions," Sinha said in a television channel programme.
GST will "fundamentally change the taxing power of the states, local governments and the Centre", and through the devolution to the states, it will transform the "fiscal architecture" of the Indian government, Sinha added.
India opened up its economy to the private sector in 1991.
The 14th Finance Commission has recommended higher share to the states in central taxes. It suggested to increase shares of states to 42 per cent from current 32 per cent.
As per the increased devolution, states will get Rs 3.48 lakh crore in 2014-15 and Rs 5.26 lakh crore in 2015-16.
In the Union Budget 2015-16 presented in the Parliament last week, Finance Minister Arun Jaitley said that government will roll out the proposed GST from next fiscal beginning April 2016.
GST will put in place a state-of-the-art indirect tax system from next fiscal, aiming to create a single tax for goods and services across the country.
Sinha also said that India has a very narrow tax base and there is a need to broaden it. "India has a very narrow tax base...We are not even hailing around the OECD average which is around 30 per cent.
We have a really really narrow tax base and frankly because of that narrow tax base we are in a very compromised position in terms of our ability to be able to operate a modern economy," he added.
He further said that because of the low tax base, India is not able to put in place an appropriate social security system that can take away hunger, want and deprivation.
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