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Apart from the media
reports, those who have knowledge about the developments in this matter have
also added confirmation to the uncertainty that the Central Board of Excise and
Customs which is dealing with the excise and the service tax at the Central
Government level still thinking that in the ensuing GST the service tax will
continue to have a positive list of services.
This means that this will continue to have all the 115 services that are now
taxable with their definitions and exemptions and even clarifications. It is not
definite that this is actually the shape of things to come but considering the
comments given by some experts on this issue which have been reported in the
media there is every likelihood that the positive list is actually still in the
reckoning.
I am writing this treatise to say that such a move of having a GST imbibing
comprehensive goods tax with a selective service tax will be a disastrous
combination. A GST can only be a combination of comprehensive goods tax and a
comprehensive service tax with negative list for both. If we have a
comprehensive goods tax with a negative list and a selective service tax with a
positive list it will be a half way house and no better than the present system.
All over the world and in Canada and New Zealand too (these being the best
examples), there is only negative list for goods and services. The Finance
Commission recommendation on GST has also given a combined goods and service tax
with a negative list for both goods and services.
The reason why GST is a highly improved system of indirect taxation on
consumption is that it is simple. There is no need to define either the goods or
the services either by artificial definition or by scientific definition or by
market definition or in any other way. If we go to buy a camera the invoice will
write camera and if the value is 100, the invoice will add 7% if that is the
rate of GST. If you go to repair a camera, the invoice will write repair of
camera and if the repair cost is 14 then the GST will be again 7 per cent, that
is 2. It is as simple as that. There is no need of writing the CCCN
classification no need to write fourteen digit CCCN classification number like
2825 90 20, etc., That is meant for Customs and for international trade.
I understand that for the Government is thinking of following International
Standard Classification of All Economic Activities which classifies the
activities as A - Agriculture, B- Fishing, D-Manufacture, F-Construction,
M-Education, etc., But this should be followed only at the time of registration
of industries and services and should not be taken to the extreme limit of the
invoices writing all the detailed classifications and sub-classifications. In
that case again it will lead to undue complications merely for the collection of
statistics. Simplicity cannot be surrendered at the alter of statistics.
If a positive list of services is maintained when the GST is introduced, it will
keep all the evil elements of the present system namely the need to define
services which need to be clarified by long circular modified by more and more
circulars. When GST comes it must come in its full glory as it exists in New
Zealand, Japan, Canada, etc. Just to study the methodology followed in these
countries a team of officers may go there and learn for a substantial period the
method followed by them in drawing up invoices, in maintaining statistics and
such daily practices without dabbling into the theory part.
Source:
Business Standard, India, dated
12/04/2010
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