GST UPDATES BY CA SUDHIR HALAKHANDI-2
WHY NOT NATIONAL GST?
We are getting so much News about GST these days and they are related to the projections mainly concerned how the GST will change the National Economic scenario positively and further majority of “trade and Industry” is in the favour of proposed GST . I am following the developments with respect to Indian Goods and Service Tax since 2006 when practically this concept was introduced by Mr. P. Chidambaram in his Budget speech of Budget -2006 in which he told that there is a large consensus about the National GST. Let us have a Look:-
“It is my sense that there is a large consensus that the country should move towards a National Level Goods and Service Tax (GST) that should be shared between the Centre and the states. I propose that we set April 1, 2010 as the date of introducing GST. World over, Goods and Services attract the same rate of Tax. This is the foundation of GST. People must get used to the idea of a GST. We must progressively converge the service tax rate and Cenvat rate. I propose to take one step this year and increase the service tax rate from 10 per cent to 12 per cent. Let me hasten to add that since service tax paid can be credited against service tax payable or excise duty payable, the net impact will be very small.”
This statement about National GST was a biggest myth about this system of GST and it was written by me in my GST primer in 2007 (ICAI CA journal) that in the present economic and political scenario National GST in India is not possible because states will not surrender their right to Tax. There is a big difference between imposing & collecting the tax and sharing the same which is collected by the centre. This was the question of fiscal autonomy of the states for which the states will not compromise.
So now at present these are lot of New items about GST and these are related to projection of upward National Economic development through GST, it’s acceptability to trade and Industry etc. Here see that we are not being given National GST hence the projection of economic developments are amazing and suppose if there is a possible situation in which National GST can be imposed that one can imagine the heights of these projections and imaginations.
The trade and Industry will be benefited if all the central and state indirect taxes are merged in a single Tax but this is not possible hence dual GST is here. If you want to understand the practical effect of Indian Version of GST then first you have to come out of these projections because there are “futures” and based on certain assumptions and further don’t go to the technicalities like “cascading effect” and statements like “new tax CGST is not mere extension of Central Excise”. Let us first discuss what will be the effect of New Central Goods and service tax on indirect taxes collected by the central Government.
See here Central excise is the Major source of revenue in the form of central indirect taxes and it is applicable to the production stage only. Now central Goods and service tax will be applied up to the distribution stage. How it will affect the central revenue will depend upon the rate of tax and certain other factors but one thing is sure that it will increase the number of Tax payers at central level and most of the VAT dealers who are not registered under the central excise will require their registration with the central Goods and service tax department.
So please if you are professional then see your client list how many dealers and manufacturers registered with VAT are registered with Central excise also and if you are a Trader or manufacturer then see how many traders around you are registered with the Central Excise department. If this is not possible then take one hour free from your busy schedule and go to 30 shop keepers and traders around you and ask them how many of them are registered with Central Excise department and give all these 30 shop keepers a “good News” that under the New system they all will require to get registration and report their turnover to one more department. Further please ask them will they favour this Dual Tax? In my small city having population of around 3 Lakhs there are 2500 dealers registered under VAT and out of them less than 50 are registered with the central excise department. So imagine the fate of dealers of your city.
There is no dispute about the qualities of Goods and Service Tax and it should replace all the Indirect taxes then why states and centre are not agree on a NATIONAL GST and why whole the trade and Industry is being dragged in procedural jugglery of this Dual GST in the name of fiscal autonomy of the states??
Is there any answer how majority of dealers are favoring Indian version of GST?
- CA SUDHIR HALAKAHNDI