Dr. Sanjiv Agarwal, FCA, FCS

Sanjiv Agarwal PhotoThe three day meeting of GST Council scheduled from 18th to 20th October, 2016 ended in two days only with a resolve to meet again on 3-4 November and then on 9-10 November, 2016 to discuss rate stricture and draft GST law respectively. The winter session of Parliament has already been convened from 16th November, 2016.

As reported in media, there is no major breakthrough in two days meeting except that all agree for the compensation to be made or received but how ? The answer to that ‘how’ is the pocket of milking cow, i.e., the ultimate tax payer or customer. India is already adopting a GST Model which is distorted because of the federal structure we have. More than that it is because of the stand taken by State Governments to retain taxing powers. Instead of unified single tax, we will have three taxes – CGST, IGST and SGST administered by different Governments nothing majority changing as we now pay VAT, CST, Excise and Service Tax etc.

It was promised that all cesses / surcharges will be subsumed in GST. In yesterday’s meeting, it has been proposed that a new levy in the form of CESS will be imposed to meet the likely revenue loss of states. That cess is proposed to be the difference between present rate and GST rate, i.e., the differential. So we are back to same old regime. Why cess is required, better add in tax itself so that tax structure is not distorted and input credit not affected- one more accounting head, one more tax, complicated payments, returns and distorted Cenvat Credit.

They are proposing four rates – 6, 12, 18 and 26 percent. Then there will be separate rate for jewellery and cess. So overall, minimum six rates will be there. Wherever band was proposed in the RNR report, Government is preferring higher end of the band. Exemptions will be reduced. Tax base will go up. Where are the reasons for any revenue loss. It is not understood and is not convincing.

All these leaders ought to stop playing this game and come out with a conceptually clear white paper on GST indicating their intentions. Let the GST be deferred for some time till clarity is there and everyone understands what GST will be imposed on Indian public. The GST Council and the Government can not make fool of taxpayers any more in the garb of compensation to states and GST.

Let them be accountable for public spending for taxes too. They are talking of 14 percent revenue growth whereas the economy is growing at 7-8 percent. Even many of the businesses are not growing at that rate. What are Chambers of Commerce / trade bodies doing ? Simply holding Seminars would not do. Educate yourself, understand and make Government understand what India wants and expects. GST must facilitate growth and development of businesses and the country.

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2 responses to “GST: Distortions to be Avoided”

  1. P.K.Rajagopal says:

    I totally agree with you.
    RNR being revenue neutral and with boom in activity as envisaged where is the compensation coming from.
    This law if hurriedly implemented will be inflationary and the common man will bear the brunt of it as it is passed on
    Prof.Rajagopal

  2. Suresh Ramaswami says:

    Very good into the intracies of the GST Distortions. And our Governments should take a honest stand which is true in spirit before taxing the public. Let them have the clarity first before implementing to avoid litigations.

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