|
After
examining various central, state and local levies
for the purpose of ascertaining how desirable is to
subsume each of them in the GST, the empowered
committee said such “subsumation should result in
free flow of tax credit at intra and inter-state
levels.” The committee in the booklet, A model and
road map for goods and services tax in India,
submitted to the Centre has also made a strong case
for states to be given the power “to levy tax on
all services.”
Going further to define the modalities, the
committee said, “the states may collect tax on
services of intra--state nature/ intra--state
transactions of services, both for central GST and
state GST. (The committee wants two components for
GST). Similarly, the Centre may collect tax for
services of the inter-state nature/inter-state
transactions of services, both for central GST and
state GST.”
The committee briefly discussed the problems that
could arise when the Centre and states start to tax
the same set of services and the modalities for
collection/apportionment of the funds, and even said
that the possibility of states collecting the tax
with regard to services of inter-state nature might
also be examined by a Centre-state committee.
The issues arises because regarding the services of
inter-state nature/inter-state transactions of
services, it is difficult to determine which state
would be entitled to what amount of tax. The idea
being spelt out by the empowered committee is that
in the case of such services, the funds (tax
collected ) should be kept in the divisive pool.
Importantly, the empowered committee has said lower
tax rates for capital goods/inputs (as is the
practice now) would be unjustifiable in the GST
regime since input tax credit would be available
throughout. The committee is also not in favour of
keeping some services at the lower rate of GST.
So, the committee is for minimising differentiation
when it comes to deciding the tax rates. It also
wants to subsume quite a number of taxes in GST but
votes for keeping alcoholic beverages and petroleum
products out. On whether purchase tax, octroi are to
be subsumed in GST, the committee is not very clear
either.
The committee cannot be faulted for its firm resolve
to keep the states’ tax powers. True federalism
would demand these powers to remain with states and
local bodies which are responsible for implementing
not only state and local programmes but even the
centrally sponsored schemes.
With their keener understanding of the ground
realities, states would be more equipped to design
and implement projects in manner sensitive to the
local needs and priorities. This is particularly
important for a large, diverse and unevenly
developed country like India where the national
sample surveys point to the flaws of centralised
planning and project implementation.
Where the empowered commute faults is in asking for separate registration of dealers and separate identification of goods and services for taxation. The committee has said thus: “... the production and distribution chain for goods with regard to manufactures having gross turnover of more than Rs 1.5 crore would belong to both the Centre and the state. The same limit would apply to service providers. For a given dealer, the turnover of goods and services should always be aggregated to decide whether the dealer has crossed the limit of Rs 1.5 crore.” It further said, “... the remaining taxpayers for goods will be assigned exclusively to states for the purpose of registration, collection , ITC matters etc. for both central GST and state GST.”
Where the empowered commute faults is in asking for separate registration of dealers and separate identification of goods and services for taxation. The committee has said thus: “... the production and distribution chain for goods with regard to manufactures having gross turnover of more than Rs 1.5 crore would belong to both the Centre and the state. The same limit would apply to service providers. For a given dealer, the turnover of goods and services should always be aggregated to decide whether the dealer has crossed the limit of Rs 1.5 crore.” It further said, “... the remaining taxpayers for goods will be assigned exclusively to states for the purpose of registration, collection , ITC matters etc. for both central GST and state GST.”
So the committee is asking for a distinction between goods and services and, at least to a limited extent, differential tax rates for goods. Such multiplicity of rates and different treatment to goods and services are avoidable. In the GST regime, what should matter to the taxman is the aggregate transaction value, not the services- or goods-content in the transaction value.
Besides justifying the idea of keeping alcoholic drinks and petroleum products outside the ambit of GST (and hence the input tax credit facility),the empowered committee is also silent on whether to subsume electricity duty in GST. This is also a position prone to attack by the Centre and tax experts. Note that there are many petroleum value chains – such as the petrochemicals-to-polymers chainwhich are replete with goods and deserve to be within the GST structure that is designed to avoid cascading of taxes.
Source
: Economic Times - Gurgaon, Haryana, India, dated
15/12/2008
|
