Prashant Pillai, Director- Corporate Segment, Thomson Reuters said, “The effort that the Government has put behind ensuring GST a reality in India is commendable. Besides being a significant game changing tax reform, this is a great example of collaboration between the centre and the states.
Corporations will now have to focus on meeting the proposed July 01 deadline which is a challenge given the nature of GST in India. With the dual GST structure, place of supply rules, multiple tax rates and potentially evolving rules, corporations will need tax infrastructure to comply with the likely July 1, 2017 implementation date and make sure ongoing maintenance and change management. Additionally, corporations will have to make sure that their supplier ecosystem is compliant to be able to avail benefits of input tax credit.
Executing this will require corporations to establish robust processes and systems to ensure master data changes, rates and rules maintenance, accurate determination of tax, integration with various upstream and downstream systems and that compliance is effectively managed with a longer term perspective. We believe GST will encourage corporations to adopt better technologies in tax and fundamentally transform the way indirect tax compliance is managed in India.”
SYNOPSIS OF DEBATE IN RAJYA SABHA ON FOLLOWING GST RELATED BILLS ON 05th APRIL 2017
- The Central Goods and Services Tax Bill, 2017
- The Integrated Goods and Services Tax Bill, 2017
- The Goods and Services Tax (Compensation to States) Bill, 2017
- The Union Territory Goods and Services Tax Bill, 2017
THE MINISTER OF FINANCE, THE MINISTER OF CORPORATE AFFAIRS AND THE MINISTER OF DEFENCE (SHRI ARUN JAITLEY): I move that the Bill to make a provision for levy and collection of tax on intra-state supply of goods or services or both by the Central Government and the matters connected therewith or incidental thereto, as passed by Lok Sabha, be taken into consideration.
I also move that the Bill to make a provision for levy and collection of tax on inter-state supply of goods or services or both by the Central Government and for matters connected therewith or incidental thereto, as passed by Lok Sabha, be taken into consideration.
I also move that the Bill to provide for compensation to the States for the loss of revenue arising on account of implementation of the goods and services tax in pursuance of the provisions of the Constitution (One Hundred and First Amendment) act, 2016, as passed by Lok Sabha, be taken into consideration.
I also move that the Bill to make a provision for levy and collection of tax on intra-State supply of goods or services or both by the Union Territories and the matter connected therewith or incidental thereto, as passed by Lok Sabha, be taken into consideration.
SHRI ANAND SHARMA: Four Bills of GST, which have been passed by Lok Sabha, were just introduced in the House by the Minister of Finance. One Nation, one Tax has been the stated objective. It is a historic change, historic legislation. We are being told that it will help in the long run to increase the GDP. It will surely benefit in long term. There was a demand made that for the legislative process to be effective, both the Houses will have to be equally involved when it comes to the passage of these Bills and these laws. But, Rajya Sabha is deliberately not being given that importance when it comes to important legislation. The purpose and objective of the GST is to have a simple, effective and efficient tax structure. But I have my doubts–it is because of the multiple GST rates as have been proposed. There is no clarity. The rules are yet to be framed. The rules should be clear. The industry must know, the States must know and the taxpayer must know what the rules are. When will you be ready with the rules? The Government is keen to implement it by 1st July, 2017. There is hardly any time left now. You will be required to set up more Working Groups. We would like to urge the Finance Minister that most of the goods where directly a citizen is affected or a consumer is affected must be included in the 5% slab. You should resist the temptation as the suggestions have been made by some sections, to bring the maximum number of Goods and Services in the model GST rate of 18%. That should be resisted. A moderate rate, perhaps, would facilitate voluntary compliance. There is also a concern about the cess. It lacks clarity. In the last few years, we have seen increase in cess and in Service Tax, which has adversely affected to the people, to the tax payers. We want to know whether, eventually, the Finance Minister proposes to subsume all these cesses? When you look at the list of exclusions, it is worrisome. All petroleum products have been kept out. The exclusion of petroleum products actually is not a healthy sign. In addition to petroleum products, electricity has been kept out. Each State will have its own rates. How would it make a ‘one country-one tax’ norm? Real estate has also been kept out. Why? When you are fighting illegal transactions and black money, why real estate should not come in? When 40 per cent of revenue base you keep out of the GDP, how is it an ideal GST? When you look at the global scenario, the GST rates are below 18 per cent. The Finance Minister alone can explain that when you have such a heavy list of exclusions, how are you going to help in achieving the objective ? There is no safeguard clause. There is no proposal as to how you will address this issue of inflation. We have to ensure that the complexities are less especially for services which are inter-State or pan-Indian.
It is imperative to have a Centralized Registration Authority under the GST. A model GST law should have a clear mechanism on how this will be implemented, particularly when it comes to assessment and audit. We are going to pass four laws and going to implement them in a few months. So, during the transition period it is important that the harsh provisions that you have put in, like recoveries, search, seizures, are not implemented. It will hurt small businesses, small retailers and small enterprises. In the case where producer is the same and it is not the final finished product, the GST should be imposed on the final product only. We would like to know, after the GST comes in, what will happen to the North-Eastern States, the incentives that have been given to the special category States and to the SEZs? How does the Finance Minister propose to address this issue? During our Government, several people in the then opposition had opposed the GST, saying it will destroy the federal spirit and it is against the Constitution. But in the larger interest of the country my party and ‘We’ in Opposition have facilitated and supported the passage of the Constitutional (Amendment) Bill regarding GST. While concluding, I will say this is not going to create neither a perfect GST nor ideally a common market. Implementation issues are there, and there are also serious concerns that it will be inflationary and you will add to the burden, to the citizens and the industry both.
SHRI BHUPENDER YADAV: Through these GST Bills we are moving ahead in the direction of making our country a stronger economic union. The imposition of indirect taxes affects the whole society uniformly and the lower strata of the society is worst effected with the cascading effect of the same. I would like to congratulate all the Members of Parliament and State Legislatures for helping in the creation of GST Council by curtailing their rights. This is a big example of consensus amongst all the political parties in the direction of economic development of the country. In view of the regional and geographical diversity of the country, the need of a fair and long term system of indirect taxes was being felt. These GST Bills have been introduced for fulfilling that need. All the rules and regulations formed by the GST Council would be put on the table of the Parliament and the Parliament would have the right to discuss and move forward on those rule and regulations. Earlier some people used to earn profit by evading taxes as there were different laws and policies regarding indirect taxes in different states in the country. But now it would not be possible after implementation of the GST Bill. GST Council is a unique forum through which the center and the States would take the decision collectively towards the economic development of the country. The implementation of GST would help in the development of trade and infrastructure and would also increase the employment opportunities. Our economy remained as a close economy for about 40 years since independence. The growth rate of the country along with availability of the opportunities was affected as a result of the same. In view of the geographical and regional diversity of the country, implementation of the uniform rate of GST is not possible. Hence, taxation under GST has been done on 4 levels. It would help in the free flow of trade which was not there because of the closed economy. Today, our Government intends to promote a fair competition in the country so that social changes could be brought by creating a new economic atmosphere in the country. The resolution taken by our hon. Prime Minister for a New India’ is on the lines of ethos of our country. It is a fact that implementation of GST could cause some problems in the beginning but ultimately, it would leads to increase in trade and GDP etc. and at the same time would extend the tax base of the country. The poor would also get the benefit of the GST. It would put an end to the parallel economy and we would move ahead towards the formal economy. Our Government is committed for the establishment of transparent governance and creating economic discipline in the country. An atmosphere of fair competition would be created in the country through GST and it would also help in creating economic equality.
SHRI NARESH AGRAWAL: This Government says that rate of taxes will be same across the nation after implementing GST. We had some objections on this and the Government has accepted some of the demands of the States. But, I want clarification on some points. The North-Eastern States and the states having J&K like topography should have been exempted likewise, Jammu and Kashmir. Today, the rates of VAT are not same throughout the country, while it was claimed otherwise at the time of its implementation. The Government has exempted States regarding Excise, liquor, Real Estate, etc. The electricity tax and petroleum has been kept with the States, I want to know how the States will be compensated in case of less revenue after the rate of taxes is lowered. The productive states like, Chennai, Gujarat, Maharashtra, etc. had great apprehension in the past, and I want to know how they have come on board now. Our villages have found no mention in the GST, whereas 70 percent of our population live in the villages. The Government must inform us whether our village industries will get any exemption under GST and whether any person after undergoing training under Skill Development will get loan on reduced rates of Bank. How the Government will save our local bodies as they will lose their sources of revenue? I also want to know the turnover limit, up to which a trader will be exempted under GST. The GSTN Company has been given almost 3,000 crores of rupees; I want to know under whose control it will function. We are ready to cooperate with the Government on matters related to national interest, but the Government should avoid misusing Article 109 and 110 of the Constitution. We have big objection on bringing this bill as a money bill. The Government should review this GST Bill after a year of its implementation. There are four slabs of Tax-rates under GST and still, the Government wants to include more taxes. I also want to know the period of time by when the complaints of the States in the GST Council will be decided. The Government must address the basic problems of the farmers and tell us whether daily consumable items, like milk, butter, etc. have been kept out of the GST.
SHRI S.R. BALASUBRAMONIYAN: All the States will lose their rights on tax after the implementation of this GST Bill. Further, these Bills have been introduced as Money Bills and the right of this House to discuss it first has been taken away. Sir, 10 groups have been set up under senior tax officials to examine the concerns of the industry and submit reports. They have been asked to focus in particular on procedural simplifications and the rate structure. GST will be the biggest reform in Indian taxation since 1947, but there are many challenges for its successful implementation. These include getting acceptance from all the stakeholders. The Revenue Neutral Rate (RNR) is one of the prominent factors for its success. The Central Government must ensure that lowering of threshold limit should not be a tax burden on small businessmen in the country. The tax administration staff at Centre and in States is to be trained properly in terms of concerned legislation and procedure. With the implementation of the proposed GST, manufacturing states like Tamil Nadu will lose fiscal autonomy. We had consistently opposed to any acts by the Centre against the interest of the State Governments. The GST Council, as a constitutional body, infringes the legislative sovereignty of both the State Legislatures and the Parliament. The decision making role of the centre in the Council are unacceptable. The GST does not affect agriculture. But, the cost of agricultural inputs will go up since fertilizers and seeds will be taxed at GST rate. I would like to highlight some issues that are being addressed to our satisfaction – the provision for special treatment of declared goods has been removed, liquor meant for human consumption and petroleum products have been kept outside the ambit of the GST, an independent mechanism for compensation of loss under GST for a period of five years has been made through a statute. The method of calculating the loss and the mechanism of compensation in a transparent manner is also to be appreciated. I would like to appeal to the Finance Minister to waive the farmers loans.
SHRI DEREK O’BRIEN: The idea of GST, even before the Congress Party had announced it in their Budget Speech, it was announced by Mr. Chidambaram. In fact the actual idea was floated by Mr. Vajpayee. Today is not to take credit for who did it. Everyone wants to take the credit. We all must know who was where and when? The BJP must be given credit as they put it in their manifesto in 2009. But, when the Bill was introduced in 2011, the BJP opposed it. My party has been consistently making promise in its manifesto that on GST it would support the idea and implementation and it would have a third eye. When we look at the consensus, this Government ought to be given credit. There were differences on the issues but, we sorted those differences out including on petroleum. Whether we talk about being a Money Bill or this concept of bypassing the Rajya Sabha, this is a serious issue. If a dealer sells an air conditioner and also provides installation, he is paying GST on the product and on the installation. We wanted to know that how we can address this. In the exchange offer the GST is charged on the real cost of the product and cost of old product is also added in it. That is the point to consider for a solution somewhere in the rules. Barring Gujarat, no one has been arrested under it for above Rs.2 crore rupees tax violation. There are almost 4,000 items whose rates are yet to be fixed. There may be a problem of fitment. Let us not get into a political slugfest over the amendments. Undoubtedly, the GST Council is a strong federal body. When the GST Council makes a recommendation, it has to come to Parliament. You are taking away the federal structure because the GST Council itself has a federal structure. It seems that we all see it roll out on July, the 1st.
SHRI C.P. NARAYANAN: Very little has been done with regard to the consultations with the large section of population that they are going to be hugely affected in various areas. The private sector is going to have a big say in matters and they will be trying to have their control over various things which perhaps the Government have not thought of The Government need to take a lot of care about these things. Taxation on petroleum and petroleum products could affect the people which has been well proven in the last two years. The Government must take care of in order to protect the lives of lakhs of beedi workers and those of the people who collect tendu leaves. There is centralization of power. Now, under the GST Bill, all taxes have been brought under the control of a GST Council. What kind of taxes need to be introduced and collected in States, must be reported to the Parliament and Parliament should have the final say. Otherwise, it would become a private affair of the rich people. I hope that amendments would be considered.
SHRI A.U. SINGH DEO: Only the implementation of this Bill will actually tell us how much it is pro-poor. One tax has been divided at many places. This defeats the purpose of GST. How the things like petroleum products, real estate and alcohol would be brought in this. Everyone has a fear that there would be high taxes on these items. The Finance Minister should clarify that how an anti-profiteering measure would be implemented. Prices are determined by the market and not by the Government. The Finance Minister should look into the issue of assesses to be assessed by the States and by the Centre in the case of a turnover of less than 1.5 crore rupees or more. Because this will create blocks and delays in the implementation of this particular system. There is an issue of casual taxable person. The GST law says that in case of casual taxable person, he or she would have to pay taxes in advance which will again have a problem in implementation. The forthcoming glitches in GST need to be ironed out. Care should be taken with regard to reimbursement to States, municipalities and village-oriented industries.
SHRI RAJEEV CHANDRASEKHAR: This reform could have come sooner and saved many lakhs of crores. Indirect taxes form the backbone of our economic model given the low direct taxes coverage. GST will now stand reduced to a State GST and a Central GST. This effect of the GST reform is a big deal for all businesses and consumers, especially, for small businesses. It also reduces costs both to consumers and producers. With easier compliance, will also come expansion of the tax base. All these will finally contribute to transforming our economy to one which is more efficient and competitive. The GST network would be another reform to tax administration without the inspector raj. GST would be pro-consumer and pro-business. There will also be cesses to finance to the states that would be levied on certain demerit goods. I would request the Government to minimise the number of services in the 28 per cent slab. I would also suggest that excessive use of cess on demerit and luxury items would trigger black economy and smuggling in these categories. Merger of SGST and CGST into one simple tax would help states with their fiscal situation. Government must make the current taxation regime as smooth and orderly for the consumers and business. GST is an important part in the progress and growth of our economy.
SHRI T.K.S. ELANGOVAN: With the GST, the important power of the State Governments of levying taxes has been withdrawn now. Such a uniform tax structure will not help people of India but foreign direct investors in India. Hence, GST law will definitely lead to inflation. I suggest that potable water and bricks should be exempted from taxation. Withdrawal of cess, intended to support the mine workers, from regular taxation is going to affect them. Government should have discussions with the various trade unions and seek their opinion before withdrawal of Cesses already available with the State Governments.
SHRI DIGVIJAYA SINGH: The report of NCAER has predicted 1.78 per cent growth in GDP with the proper implementation of GST. Today 82 per cent countries of the world have adopted GST with single rate structure. Countries like China and Ghana had to withdraw GST due to complications involved in implementation of GST. Proposal of GST with 6-tier rate structure would require firms to keep separate records for different purchases. Traders dealing with Petroleum products and alcohol would now have to file their return separately under cess and VAT of concerned states due to exclusion of these from GST. Speedy transfer of funds to urban local bodies would help them in improving their dismal financial condition. Small and medium traders would have to face difficulty with such GST regime. Hence, Government should consider on bringing an awareness campaign on GST, reduce exemptions in any tax structure, revisit some of the harsh provisions of the Bill and introduce single tax structure in the country at the earliest.+
Response by Finance Minister Shri. Arun Jaitley in Rajya Sabha with respect to discussion on CGST, IGST, UT-GST & GST Compensation Bills, April 6, 2017