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He
also called for the inclusion of the construction and
housing sectors in the GST tax base, stating that the
present piecemeal taxation of the housing sector
encourages perverse incentives.
“The
inclusion of the rail sector will be necessary if a
level playing field is to be provided to the road and
air transportation sectors, which will be subject to
this tax,” Dr Kelkar said at an Assocham national
conference on GST here.
The
proposed GST will be a dual tax with Central and State
GST components levied on the same base. There will be no
distinction between goods and services for the purpose
of the tax with a common legislation applicable for
both.
As
for the assessment of the dual tax, indications are that
the large entities would be assessed by two authorities
— a Central and a State agency for the respective
components.
Smaller
enterprises with a turnover below a specified limit will
be required to interface with only one agency for
assessment, official sources said. The Finance Ministry
highlighted that the dual tax does not mean two separate
levies, but two components of a single tax.
Meanwhile,
on the inclusion of Railways in the GST regime, Dr
Kelkar said that this will ensure that all inter-State
transportation of goods can be tracked through the
proposed IT network.
“The
Railways themselves will benefit from this by availing
(themselves of) input tax credit on the significant
purchases made by them,” Dr Kelkar said.
As
for the impact of GST’s introduction on the economy,
Dr Kelkar said that one can expect a positive impact,
with annual GDP gain of about $15 billion.
“Discounting
these flows at a modest 3 per cent per annum, the
present value of the GST works out to about half a
trillion dollars. This is indeed a staggering sum and
suggests the need for energetic action to usher the GST
regime at an early date,” he said.
One
of the terms of reference of the Thirteenth Finance
Commission related to consideration of the impact of the
proposed implementation of the GST with effect from
April 1, 2010 including its impact on the country’s
foreign trade.
Dr
Kelkar said the GST will promote exports. “A recent
study on the impact of the GST on foreign trade
indicates that the rate of growth of exports will be
significantly higher than that for imports. The GST will
also promote employment. Perhaps, most importantly, it
will spur growth,” Dr Kelkar said.
The
Finance Commission has also expressed its willingness to
set up a fund for providing compensation to States in
order to advance the implementation of a “flawless GST”.
Dr
Kelkar also stressed the need for a common dispute
resolution mechanisms as well as a mechanism for giving
advance rulings.
On
the treatment of inter-State sales. Dr Kelkar said that
it would be necessary to guard against tax arbitrage
where local sales which will be taxed could be shown as
inter-state sales which will not. “Putting in place
the rules of supply for the inter-state provision of
services will be demanding”, he noted.
For
GST to be successful, Dr Kelkar said that all States and
the Centre should implement it in a similar fashion.
“Only this will bring about the national common market
which is one of its goals. This will be possible when
there will be a common law, a common assessment
procedure and perhaps even a common return,” he added.
Source :
The Hindu, India, dated 29/06/2009 |
