Dr. Sanjiv Agarwal
The new and progressive tax of future, Goods and Service Tax (GST) is once again into troubled waters and may now not sale through smoothly. While Indian Government and India has been dreaming of GST for over a decade now, it doesn’t seem to happen as it faces challenges at all fronts- political, constitutional, legal, financial and technological. The GST is going to be the most impacting tax reform in independent India which will subsume almost all indirect taxes including state value added tax, central excise and service tax. It will also digest small tax like octroi, entertainment tax, purchase tax and certain other state levies.
The progress of GST and its navigation is entrusted to a high powered Empowered Committee comprising of various State’s Finance Minister and Union Government’s nominees. It is headed by a non-congress person. The first Chairman was Asim Dass Gupta of CPM who resigned when CPM was voted out of power in West Bengal. The Chairman till last week. Mr. Sushil Modi of BJP and Dy. Chief Minister of Bihar resigned as Chairman following breakup NDA between JDU and BJP last week. The GST panel has so once again become headless and unless the new chairman is appointed, no further progress may be thought of.
The Empowered Committee of State Finance Ministers in a recent meeting agreed to have a common exempted list of over 90 goods – both for CGST and SGST under proposed GST regime. Presently there are 96 items in exempted goods category for Value Added Tax and Centre has 243 items exempted under Central Excise. Centre will, therefore, prune down these exemptions in phases. The Committee also agreed for limit of Rs. one crore and 0.5 per cent floor rate for the compounding scheme which allows a trader to pay minimum tax but not avail the tax credit. There is no agreement, yet on common threshold limit for traders to be registered as well as for dual control of traders. The sub-committee has recommended that under GST, a trader with a turnover upto Rs. 1.5 crore should be controlled by the State Government while those with a turnover above Rs. 1.5 crore may be controlled by both-states and the centre.
For GST network, a special purpose company has also been incorporated to implement IT back bone of proposed GST. It will provide IT infrastructure and services to various stakeholders including the Union and State Government. It has been set as an as section 25 (not for profit) company under the Companies Act, 1956, non-government private limited company in which Government will retain strategic control.
While Empowered Committee was preparing the ground for the GST Council so that as soon as the GST Bill is passed, it can be implemented without much loss of time. However, the efforts on GST may slow down now with Empowered Committee Chairman, Mr. Modi, resigning from the position after the breakup of two political parties. However it is expected that by the end of this month, new Chairman may be nominated.
The GST efforts will certainly be adversely affected with this development and with all political parties now moving on to election mode (May, 2014), The GST may take a back seat. Further, it is also not certain, which way the GST will go in the new governance scenario as India may not get a majority government ruled by a single party or any strong alliance. With federal system we have, GST does not appear to be emerging on the scene in near future so as to take business, trade and industry ahead for tax efficiency and productivity enhancement. All of us may have to live with multiple taxes for next couple of years.