THE SENIOR ANALYST
How is the concept of CGST and SGST any
improvement over the existing CENVAT and Sales
Tax regimes? SGST would give the states some
leverage to vary taxes within a spectrum of
acceptability, ensuring some credible degree of
autonomy to the states. However, once tax slabs
start varying, the dream of a unified tax regime
could be a distant dream.
Central Excise has a taxpayer base of around five
lakh right now. Service Tax has a taxpayer base of
another ten lakhs and it is increasing rapidly as
more and more services are being brought under
service tax purview. The manpower and the IT
infrastructure have not kept up with the rising tax
payer number or the increased documentation.
Even today, the indirect tax administration has
several challenges to meet regarding tax
collection, record keeping and maintenance,
document managing, logistics, recovery of arrears
and doubtful, litigations pending, an aging and
slow workforce, weak information technology
and a general indifference towards the
population, with its limited assessee base. This
base is supposed to increase to more than fifty
lakhs if GST gets implemented and becomes
operational. Staff shortages have made situations
difficult already in Central Excise. With GST, the
department would immediately implode. The two
major branches are planned (CGST and SGST) to
be integrated under the new proposed tax regime
leading to a unified tax system. Even after 50
years of establishment of the Central Revenue
Boards, there is lack of coordination between the
two central revenue departments and this has led
to diminished efficiency and effectiveness of the
tax
revenue
departments.
Expecting
harmonisation of 28 state tax revenue
departments is more of a utopian imagination for
a nation like ours.
Intentions:
Items are being thrown in and out of the GST
purview as if it’s a personal basket and if this
Jan 2014
continues to be done, the change will serve no
purpose. Petroleum (which constitutes a major
chunk of the import and manufacturing and
consequentially a large part of Customs, Central
Excise and Sales Tax) was kept out of the ambit of
GST until recently. Alcohol is still kept out GST
ambit, and the states whose substantial revenue
generation is dependent on incomes from liquor
will be reluctant to give up control over Abkari.
Petroleum and alcohol would have been the first
to be taxed via GST if fiscal prudence and
economic common sense is to be considered as
the priority. Tobacco is also kept out of the GST
list with a brand of a “demerit item”. This seems
to be very illogical as any item which adds value
should be chargeable to GST and there shouldn’t
be any place for an item like demerit item. Latest
discussions reveal that the 200 items at state
level and another 100 items at centre level will be
kept out of the GST bracket. If the statistics is
anywhere near to it, it will be just a mockery of
GST implementation.
Further devolution of compensation:
The states have been making heavy noises for
compensation for any CST losses that they might
incur in the first few years of GST implementation
and want to be compensated by the centre. They
have recently agreed on a figure as well which
would be dispersed in three staggered payments.
Since lower administrative units are also part of
the grand idea of de-centralisation, federalism
and devolution of powers doesn’t end at state
levels. But none of the states have come forward
to compensate the local bodies. Municipal
Corporations and Panchayats are also going to be
divested of their powers to collect taxes as GST
intends to merge various indirect taxes like
Octroi, Entry Taxes, Betting tax, and surcharges.
Dispute resolution:
The number of cases pending in front of the
Bombay bench of the Indirect Tax Tribunal is
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