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And
you get input tax credit
unless you are the final consumer. The ministry also
believes that the proposed single, comprehensive
indirect tax would make sense only if exemptions are
very sparingly allowed. Subsume as much extant taxes
in it as possible, it says. Reducing the
multiplicity of taxes
and shunning cascading of taxes, the twin objectives
of GST, cannot be met unless these principles are
meticulously respected , the ministry has said.
It was responding to the committee of state finance
ministers, which presented, in a report, tentative
models of GST to it.
The Union ministry has found the empowered
committee’s report (ECR) “confusing” in many
respects. The ECR for example does not explicitly
say as to whether there would be separate
registration for dealers in goods and services, but
prescribes separate lower cut-offs for each to be in
the tax net. This adds to the ambiguity that anyway
exists with regard to the structure of GST. Although
many models are under consideration, what looks more
likely is a composite GST with central and state
components . For this to materialise, various
administrative , legal and even constitutional
(Seventh Schedule) changes are required.
“The centre is not against segregation (of goods
and services) for analytical purpose, but it thinks
that when it comes to actual taxation, the
transaction value should be the guiding factor,”
an official said.
That is just one area of disagreement. The states
and the Union ministry have different views on
whether to subsume taxes
on petroleum products in GST. The ECR proposed
keeping petroleum taxes—which account for about
35% of the gross indirect tax revenue of the centre
and states—outside the GST ambit.
The centre, however, thinks use of the petroleum in
the petrochemical chain would definitely deserve to
be within the GST framework, which allows input tax
credit. This, it argues, is necessary
to avoid tax on tax. It also thinks that a
substantial component of the petroleum taxes
(central excise and state Vat) could be subsumed in
GST and if necessary a small component could be kept
outside the facility of input tax credit. The logic
is that the government has a vested interest to
control the consumption of petroleum, which is a
scarce resource.
As far as tax aspects of energy industry is
concerned, many models exist now. While petroleum
taxes are outside the Cenvat and state Vat chains,
sale of coal is Vatable. Electricity duty is a revenue
option with states. The centre wants to make the
policy position with regard to taxation of energy
unambiguous.
And the centre does not change its stance when it
comes to question of taxation of alcohol in the GST
regime. The ECR wants the state excise component of
alcohol tax to be outside the ambit of GST. The
centre, however, is doubtful if this is a good idea.
The centre also wants purchase tax to be subsumed in
GST. The ECR is devoid of a comment on the inclusion
of the electricity duty in GST (some states impose
this duty and some don’t ). The centre has asked
the states to give a considered view on this.
In general, the centre is for a more inclusive GST
that is non-discriminatory between goods and
services or among goods. The centre has gone to the
extent of asking whether it wouldn’t be better to
not call GST by that name as it highlights the
concept of goods and services. What is being aimed
at is a transaction tax (or a consumption tax)
rather than a tax on goods and services, opined a
central government official.
States, on the other hand, are keen to ensure that
their taxation powers won’t be undermined . They
fear, reasonably, that GST could take away their
ability to tax directly. There are unresolved issues
about the levy, collection and appropriation,
disbursal of input tax credit, as well as the
sharing of tax revenue between the centre and states
in the GST regime. Zero rating of export goods is
another issue. As things stand now, it seems it is a
long haul.
Source
: Economic Times - Gurgaon, Haryana, India, dated
10/11/2008
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