The Government should implement the GST regime with defined sharing arrangement between the State and the Centre, thereby protecting the interest of the State in generating revenue.
How will carbon credits be taxed under the proposed Goods and Services Tax regime?
The discussion paper has not come out with any specific definition whether it is to be considered as goods or services for the purpose of levying a tax.
According to the Bangalore Chamber of Commerce and Industry (BCIC), carbon credits (Certified Emission Reductions) should be treated as services and taxed as such. In its note for submission to the Union Government, BCIC has argued that CERs are intangible in nature and it is either exported to industrialised countries or are tradable as securities on specified exchanges. Hence CERs should attract only services tax, not goods tax. The taxability of the CERs should depend on the place where they are generated and the place where they are registered, BCIC said. It said in case the place of generation is in India and the place of registration is outside India, they should be regarded as exported.
This is among a number of suggestions that the BCIC has madein a note after as analysis of the implications of GST.
Among others things, BCIC favours uniform implementation of GST across States, single Union legislations to avoid duplicity and multiplicity of legislative framework to provide ease in applicability and administration of the levy. To retain the basic framework of GST as envisaged by the discussion paper, the Centre should have the sole power for any amendments, it said. States should not be given the power to amend the basic framework of the GST legislation to avoid the possibility of different interpretations to the legislation or the rule laid down the by the Centre.
It recommended that the government implement the GST regime with defined sharing arrangement between the State and the Centre, thereby protecting the interest of the State in generating revenue.
On the point of uniform implementation, BCIC explained that unlike VAT, which operates on originating principle and could be implemented in a staggered manner, absence of uniform implementation of GST operating on destination-based principle would result in cross-border transactions getting taxed in two States, bringing significant hardships to the trade and industry. This will also restrict free flow of cross-border transactions.
BCIC has also suggested that the legislature should adopt a common threshold for both, goods and services. This will avoid creating a distinction between goods and services.
Treating goods and services on par would also bring administrative ease to the legislation, it said. Accordingly, in case goods and services are treated on par, the trade and industry would not feel the need to take positions in favour of that which suffers lower rate of tax.
