Industry urges FM to merge central levies under one
The Bangalore Chamber of Industry and Commerce (BCIC)
has urged Finance Minister Pranab Mukerjee to take steps
to merge the present central levies such as excise,
service tax and customs into a single levy which may be
referred to as the Union GST as part of the proposed
legislation on GST.
In a pre-budget memorandum on indirect taxes submitted
to the government, the BCIC has recommended that policy
announcements on this aspect may be made in the Union
Budget itself. “The rate of taxation for both goods and
services should be the same so that substantial prospect
of litigation based on classification is eliminated.
Further, the Central Government should endeavour to
implement the law on GST at the earliest after giving
trade and industry sufficient information on the
proposed legislation, the legislative framework for
goods and services, point of taxation rules, the median
GST rate and time to enable them adapt to their IT
systems,” the chamber said in a statement.
As regards the concept paper issued by the board on introduction of negative
list of services, it is highlighted that the positive list has the advantage of
definitiveness, which is a pre-requisite for any taxation law. For this reason,
despite an increase in the number of services, levy of service tax only on a
positive list of taxable services is to be preferred. As also stated in the
Concept Paper, the positive list has already attained a certain level of
awareness and stability in administration. Further, judicial precedents have
emerged on the law which has brought about a higher certainty, BCIC said.
“The proposal to levy services tax based on a negative list of services is
pre-mature. The negative list scheme of taxation would operate well only where
the levy of tax on goods and services is unified and accordingly the negative
list approach should be deferred until the introduction of GST,” it said.
BCIC also suggested that place of supply rules˘place of consumption rules for
services may be notified and implementation of levy of service based on negative
list be considered only after these rules are clear. The chamber fears that the
introduction of a negative list could cause an increase in the overall cost of
operations and with already thin margins and declining trend of revenues in
major sectors, introduction of negative list will not favour the masses and be
detrimental to growth than being an engine for reform.
The Finance Minister in 2004 had introduced an Educational Cess of 2 per cent
and additional Secondary and Higher Education Cess of 1 per cent in 2007. This 3
per cent Educational Cess is calculated on the aggregate of customs duty payable
on the imported item.
Further, this 3 per cent Educational Cess on Customs Duty is not allowed for the
purpose of availing CENVAT credit.
Consequently, it increases the cost of import. Such costs hinder the exporters
in being price competitive in the international market. Therefore, BCIC
recommends that Educational Cess on Customs Duty should either be abolished or
else CENVAT credit of Educational Cess on Customs Duty should be allowed. Such a
measure would be a step in right direction considering the present slower growth