IMPERFECTIONS IN GST BILLEsha Agrawal
There are many imperfection in the bill and several provision require amendments over the coming two years or so, according to our former finance minister P Chidambaram. Let us discuss some of the imperfection in the bill.
- One, the multiplicity of rates
- two, the compliance provisions
- three, lack of clarity in some provisions , let us discuss with an example. Variation in turnover, what happens if the turnover goes above Rs 1.5 crore in one year and then falls below Rs 1.5 crore the next year and then after 2-3 years, again goes above Rs 1.5 crore.
- keeping key inputs such as electricity, petroleum outside GST
- Assumption of the states and the Centre that there will be a 14 per cent rise in revenue but how did they arrive at that. Why did they arrive at 14 per cent is also not clear. In normal circumstances, we should be happy even if there’s a 12 per cent increase for whatever reason.
- July 1 deadline, if it were to happen, heavily loaded against the small and medium businesses, The bigger guys can employ talent and skills to quickly get on to GST. Businesses in the tier II and tier III towns who only have a local accountant to handle their accounts and are not yet completely familiar with electronic filing, its a huge burden on them. And they will make mistakes. when they make mistakes, the tax official descends on them and starts issuing notices and there will be a huge backlash against the trading community and the business community.
- P Chidambaram says that most items should be under 18% rate
- It is said that if there is a reduction in the tax rate, there shall be a commensurate reduction in the price but tax is only a factor that determines price. There could be a reduction in the tax rate but simultaneously there could be an increase in the raw material cost, there could be a rise in electricity cost, there could be a rise in various other factors that make up a price. So, this is open to abuse because the tax official will simply issue notice like he has issued notices to 18 lakh assessees in income tax and say you are indulging in anti profiteering. There is no definition of anti-profiteering, they are going to set up an authority which will devise its own procedure. It’s clearly open to abuse.
- The second aspect is that if there’s profiteering, there are other regulators and institutions which deal with it. There’s a consumer forum and there’s Competition Commission (of India). So why should power be given to a tax official to decide something that a market should decide. As far as the tax law is concerned, its only purpose is to levy a tax and collect a tax. Why should it go beyond that and ask questions which do not fall within the purview of the tax book. For example, you levy an income tax, do you ask a doctor, how many patients do you treat for free? You levy income tax, do you ask what part of his income is he giving to charity. That is not the purpose of the tax law, nor can it be within the province of the tax official.
- The GSTN not going through a trial run, there a chance that there could be inter-state disputes and the state-Centre disputes, a dispute between tax collector and taxpayer will be resolved by the usual assessment, appeal, revision, tribunal proceeding. But disputes between the Centre and state or state and state, there is no machinery yet. The Constitutional amendment provides for a machinery, but that machinery is not yet set up. So if disputes arise very early after GST is introduced, there is no machinery to resolve it.
The multiplicity of the rates, doesn’t that distort the original idea of GST bringing about a unified tax regime? In reply to this question P Chidambaram says that,” That’s precisely why I called it an imperfect bill,it can be made less imperfect if you put 70 per cent of the goods and 70 per cent of the services in the rate of 18 per cent. And, if you manage to push 90 per cent of the goods and 90 per cent of the services in the modal rate of 18 per cent, it becomes even less imperfect,”
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Source:- Financial express, Indian express etc