|
Constitutional
amendment
The foremost task relates to amendment to the Constitution. As per the existing
provisions, the Central Government is precluded from taxing sales and purchases,
which power vests exclusively with the States. Though tax on services can be
imposed by the Centre vide amendment made on January 15, 2004, it has not yet
been made fully effective; at present, service tax is being imposed under entry
97 in List-I.
Therefore, amending the Constitution to give power to the Centre for imposing
tax on trading activities and to States for taxing services is the first step to
be taken in the direction of GST. Constitutional amendments may not be easy
because of the political structure.
Services will need to be integrated into the tax network of the country. Many
exemptions/concessions, including area-based ones, may have to be
withdrawn/adjusted. This, however, may not be easy.
Threshold limit
Agreement has to be reached regarding threshold limit for GST. The Empowered
Committee of State Finance Ministers has pegged it at Rs 1.50 crore, the task
force of the Finance Commission has suggested even withdrawal of exemption of Rs
1.50 crore for small-scale industries, while media reports show that the Centre
wants it to be fixed at Rs 10 lakh.
There are differences with regard to the rates of tax too — 16 per cent, 12 per
cent, or as the task force of the Finance Commission has recommended, 5 per cent
for CGST and 7 per cent for SGST.
The scheme will have to be worked out in such a way that the revenues of the
Centre and States are not affected.
The administrative staff involved in implementing GST will have to be trained
well. Also a robust and integrated MIS dedicated to the task of tracking flow of
goods and services across the country will have to be developed to provide
accurate data for taxation and check evasion and avoidance.
Procedures for taxation, payments of demands raised and recovery of GST will
have to be scientifically developed. Formats for payment of CGST and SGST will
also have to be worked out. Problems will also arise on the date of
implementation in regard to treatment of closing stocks of finished goods,
inputs, input services, capital goods, tax credits, and so on.
Some major problems could arise in respect of:
Sharing of taxes between the Centre and State and States inter-se; and
Arriving at a common rate of tax. The consensus seems to have dual rates — 8 per
cent for the Centre and the same rate for the States which, if adopted, would be
at the cost of simplicity, which only a single rate can provide.
Some suggestions
The ideal situation would be to have a single legislation both for the Centre
and the States to be levied on a common base. The tax should be imposed
simultaneously in all States.
GST should be an exemption-free law. In case exemptions become absolutely
necessary, these should be kept at the barest minimum. All indirect taxes should
get subsumed within the GST.
Classification of goods and services should be made on the basis of
international norms.
The problems and issues are many. Unless a beginning is made right away to sort
these out, the targeted date of April 1, 2011, may not be reached. A proper
course would be to appoint a task force in the CBEC (Central Board of Excise and
Customs) to work on day-to-day basis under the guidance of Empowered Committee
and ensure that the time fixed to operationlise the Act is adhered to.
Source: The Hindu BusinessLine, India, dated
15/05/2010
|
