INDIRECT TAXATION PROJECT
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National Law University Odisha (Established by Govt. of Odisha Act IV of 2008)
I NDI NDIRECT RECT TAXATION PROJECT PROJECT ON
THE GOODS AND SERVICES TAX BILL, 2016
SUBMITTED BY: Abhih!" D# (2013/BA.LL.B/002) A$%i& A&'#$ (2013/BA.LL.B/007) D!!(#$"#) Di"hi% (2013/BA.LL.B/012) *+h#)# G+(%# (2013/BA.LL.B/022) V#)%i"# Ch#h#' (2013/BA.LL.B/056)
INDIRECT TAXATION PROJECT
TABLE O- CONTENTS
Table of Contents-----------------------------------------------------------------------------------------2 Hypothesis------------------------------------------------------ Hypothesis-------------------------------------------------------------------------------------------------------------------------------------4 --4 Research Questions----------------------Questions------------------------------------------------------------------------------------------------------------------------------------------------5 5 Scope------------------------------------------------- Scope-----------------------------------------------------------------------------------------------------------------------------------------------------6 6 Research methodology-------------------------------methodology----------------------------------------------------------------------------------------------------------------------------- Ob.!/%i! Ob.!/%i! S3+)/! N3$43/%)i$#' N3$43/%)i$#' R!!#)/h R!!#)/h M34! 35 Ci%#%i3$ !ntroduction------------------------------------------------------- !ntroduction---------------------------------------------------------------------------------------------------------------------------------" -"
Justification Justification of GST--------GST--------------------------------------------------------------------------------------------------------------9 -------------------------------------9 CH#$T%RS-CH#$T%RS------------------------------------------------------------------------------------------------------------------------------------------&& ----------------------------------------&& B!$!5i% 35 GST11 -'# 35 GST12 O((3)%+$i%i!: O((3)%+$i%i!: 17 17
An end to cascading cascading effects:----effects:-------------------------------------------------------------------------------------------! ---------------------------------------! G"o#t$ of Re%enue in States and &nion:---------&nion:------------------------------------------------------! --------------------------------------------! Reduces t"ansaction t"ansaction costs and unnecessa"' #astages:---------------------------------------! E(i)inates t$e )u(ti*(icit' of ta+ation:---------------------------------------------------------! One Point Sing(e Ta+:-----------------------------------------------------------------------------, Reduces a%e"age ta+ u"dens:---------u"dens:----------------------------------------------------------------------------------, ----------------------------------------, Reduces t$e Co""u*tion:--------------------------------------------------------------------------, Ch#''!$! Ch#''!$! 18 18
.it$ "es*ect to ta+ t$"es$o(d:--------------------------------------------------------------------, .it$ "es*ect to natu"e of ta+es:------------------------------------------------------------------/ .it$ "es*ect to nu)e" of enact)ents of statutes:--------------------------------------------/
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INDIRECT TAXATION PROJECT
TABLE O- CONTENTS
Table of Contents-----------------------------------------------------------------------------------------2 Hypothesis------------------------------------------------------ Hypothesis-------------------------------------------------------------------------------------------------------------------------------------4 --4 Research Questions----------------------Questions------------------------------------------------------------------------------------------------------------------------------------------------5 5 Scope------------------------------------------------- Scope-----------------------------------------------------------------------------------------------------------------------------------------------------6 6 Research methodology-------------------------------methodology----------------------------------------------------------------------------------------------------------------------------- Ob.!/%i! Ob.!/%i! S3+)/! N3$43/%)i$#' N3$43/%)i$#' R!!#)/h R!!#)/h M34! 35 Ci%#%i3$ !ntroduction------------------------------------------------------- !ntroduction---------------------------------------------------------------------------------------------------------------------------------" -"
Justification Justification of GST--------GST--------------------------------------------------------------------------------------------------------------9 -------------------------------------9 CH#$T%RS-CH#$T%RS------------------------------------------------------------------------------------------------------------------------------------------&& ----------------------------------------&& B!$!5i% 35 GST11 -'# 35 GST12 O((3)%+$i%i!: O((3)%+$i%i!: 17 17
An end to cascading cascading effects:----effects:-------------------------------------------------------------------------------------------! ---------------------------------------! G"o#t$ of Re%enue in States and &nion:---------&nion:------------------------------------------------------! --------------------------------------------! Reduces t"ansaction t"ansaction costs and unnecessa"' #astages:---------------------------------------! E(i)inates t$e )u(ti*(icit' of ta+ation:---------------------------------------------------------! One Point Sing(e Ta+:-----------------------------------------------------------------------------, Reduces a%e"age ta+ u"dens:---------u"dens:----------------------------------------------------------------------------------, ----------------------------------------, Reduces t$e Co""u*tion:--------------------------------------------------------------------------, Ch#''!$! Ch#''!$! 18 18
.it$ "es*ect to ta+ t$"es$o(d:--------------------------------------------------------------------, .it$ "es*ect to natu"e of ta+es:------------------------------------------------------------------/ .it$ "es*ect to nu)e" of enact)ents of statutes:--------------------------------------------/
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INDIRECT TAXATION PROJECT
.it$ "es*ect to "ates of ta+ation:----------------------------------------------------------------/ .it$ "es*ect to ta+ )anage)ent and inf"ast"uctu"e:------------------------------------------/ IMPACT O- GST ON VARIOUS SECTORS, STA*EHOLDERS AND CLASSES16
1o# it is going to affect %a"ious Indust"ies and Secto"s------------------------------------- Secto"s------------------------------------- 1o# it #i(( affect diffe"ent 3inancia( acti%ities------------------------------------------------2! 1o# it affects affects %a"ious Sta4e$o(de"s---Sta4e$o(de"s---------------------------------------------------------------------------2, ---------------------------------------2, C)i%i/#' A$#'9i 35 %h! GST Bi'' Bi'' 2 2
Reco))endations ' t$e 5e(4a" Co))ittee--------------------------------------------------2 Co)*(ications in t$e 6i((-------------------------------------------------------------------------27 S+!%i3$ R!/3&&!$4!4 53) %h! Bi'' Bi'' 0 0
Disc$a"ge of e(ect"icit' f"o) t$e GST i(( #i(( a)ount to inc"ease in t$e cost of *o#e" in t$e consu)e" end8-----------end8---------------------------------------------------------------------------------------------------------------0 -----------------------------------0 Sta"t-u*s to e uti(ised as an inte"face to c"eate an efficient #o"4 ecos'ste)8------------0 1'*ot$etica( fea"s of *$a")aceutica( secto"s--------------------------------------------------0 P"essu"e on t$e an4ing secto"-------------------------------------------------------------------0 Inco"*o"ation of s)a(( t"ade"s in t$e GST i((-------------------------------------------------0 Conce"ns o%e" )anufactu"ing )anufactu"ing of so(a" *o#e" eui*)ent------eui*)ent------------------------------------02 -----------------------------02 E+c(usion of do)estic *"oducts f"o) t$e GST------------------------------------------------02 Conclusion-----------------------------------------------------------------------------------------------''
THE GOODS AND SERVICES TAX BILL, 2016
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INDIRECT TAXATION PROJECT
HYPOTHESIS
T$e *a*e" t$"o#s (ig$t on diffe"ent as*ects of t$e *"o*osed Goods and Se"%ices Ta+ ;GST< in India= its *"inci*(es and o>ecti%es? its )odus o*e"andi= and its i)*(ications fo" go%e"n)ents= indust"ies and consu)e"s8 T$e *a*e"s a(so e+a)ines (ig$t on #$' t$e GST i(( is sti(( *ending in t$e *a"(ia)ent and t$"o#s (ig$t on genuine conce"ns of t$e state go%e"n)ents in t$is go%e"n)ent8 T$e aut$o"s contend t$at f(a#(ess GST is one of t$e )ost i)*o"tant "efo") agenda #$ic$ can *"o%ide a ne# i)*etus to econo)' of t$e count"' and attain inc(usi%e g"o#t$8
THE GOODS AND SERVICES TAX BILL, 2016
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INDIRECT TAXATION PROJECT
R ESEARCH ;UESTIONS
!( !!( !!!(
)hat are the merits and demerits of the *oods and Ser+ices Ta, ill. 2/&60 )hat are the impacts of *ST ill on +arious sta1eholders and affected parties0 )hat are the probable suggestions that should be recommended for an efficacious
!(
ta,ation regime0 )hat are the implications of the ne3 bill on the indirect ta,ation policy in !ndia0
THE GOODS AND SERVICES TAX BILL, 2016
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INDIRECT TAXATION PROJECT
SCOPE
T$is *a*e" focuses on t$e *"ocess of int"oducing t$e Goods and Se"%ices Ta+ ;GST<= "inging out t$e *e"s*ecti%es of diffe"ent sta4e$o(de"s and t$e contentious issues8 T$e GST #as e+*ected to susu)e a %a"iet' of ta+es and si)*(if' t$e indi"ect ta+ "egi)e8
THE GOODS AND SERVICES TAX BILL, 2016
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INDIRECT TAXATION PROJECT
R ESEARCH METHODOLOGY
O>ecti%e T$e o>ect of t$e Resea"c$ A"tic(e is to gain an in-de*t$ insig$t into t$e Goods and Se"%ices ta+ i((= 2/ and its i)*(e)entation and effects8 Sou"ces T$e sou"ces t$at $a%e een *ut to use fo" t$is "esea"c$ a"tic(e a"e )ost(' seconda"'8 So)e *"i)a"' sou"ces $a%e a(so een "efe""ed to fo" t$e "esea"c$8 Seconda"' sou"ces co)*"ise of *"inted and non-*"inted sou"ces8 P"inted sou"ces inc(ude oo4s= a"tic(es and >ou"na(s #$e"eas? non-*"inted sou"ces inc(ude )ate"ia( f"o) "esea"c$ dataases (i4e JSto"= SSRN= @anu*at"a and 1ein on(ine Non-doct"ina( Resea"c$ T$is #o"4 does not consist of an' 4ind of doct"ina( "esea"c$8 T$e"e is no "efe"ence to an' doct"ines in *a"ticu(a"8 T$e #o"4 consists of statuto"' inte"*"etation and case studies a)ong ot$e" t$ings8 @ode of Citation An unifo") citation )et$od $as een used in t$e fo((o#ing #o"48
THE GOODS AND SERVICES TAX BILL, 2016
INDIRECT TAXATION PROJECT
INTRODUCTION
P"esent(' a()ost , count"ies in t$e #o"(d $a%e int"oduced Goods and Se"%ices Ta+ ;GST< in one o" t$e ot$e" fo") ti(( no#8 3"ance #as t$e fi"st count"' to int"oduce it8 T$e idea of (aunc$ing GST in India #as fi"st initiated ' Go%e"n)ent of India in 2 unde" t$e (eade"s$i* of Ata( 6i$a"i a>*a'ee= t$e t$en P"i)e @iniste" of India8 1o#e%e"= t$e 6i(( (a*sed #it$ t$e disso(ution of t$e ,t$ Bo4 Sa$a8 Bate" on= t$e Constitution A)end)ent ;22nd< 6i(( 2! on GST #as int"oduced in t$e Bo4 Sa$a on Dece)e" 9= 2! and it #as *assed in t$e Bo4 Sa$a on @a' /t$ 2,8 T$e Constitution A)end)ent ;22nd< 6i(( 2! ;CA6< #as "efe""ed to t$e Se(ect co))ittee of Ra>'a Sa$a on @a' != 2,8 On Ju(' 22nd 2,= t$e Se(ect Co))ittee $as su)itted its "e*o"t #it$ a**"o*"iate )odifications and so)e "eco))endations fo" inco"*o"ation8 No# t$e CA6 a#aits t$e a**"o%a( in t$e Ra>'a Sa$a8 GST is a %a(ue added ta+ (e%ied ac"oss goods and se"%ices8 T$e GST "egi)e intends to susu)e )ost indi"ect ta+es unde" sing(e ta+ation "egi)e8 T$e "oad o>ecti%es of GST a"e to #iden t$e ta+ ase= e(i)inate cascading of ta+es= inc"ease co)*(iance t$"oug$ (o#e"ing of o%e"a(( ta+ u"den on t$e goods and se"%ices and "educe econo)ic disto"tions caused ' inte"-state %a"iations in ta+es8 6' doing a#a' #it$ (atent o" e)edded ta+es= it #ou(d *"o%ide (ee#a' fo" t$e co)*etiti%eness of do)estic indust"' %is-a%is i)*o"ts and in inte"nationa( )a"4ets82 5e(4a" Co))ittee Re*o"t and t$e e%ents t$at fo((o#ed8 A Tas4 3o"ce on t$e i)*(e)entation of 3isca( Res*onsii(it' and 6udget @anage)ent Act #as fo")ed ' t$e Cent"a( Go%e"n)ent on 3e"ua"' 7= 2! unde" t$e c$ai")ans$i* of i>a' 5e(4a" in 208 T$e "e*o"t su)itted to t$e Cent"a( Go%e"n)ent on Ju(' /= 2!= st"ong(' "eco))ended t$e ado*tion of GST fo" t$e indi"ect ta+ation in India8 T$e 5e(4a" Tas4 3o"ce "e*o"t stated t$at India $as een )o%ing s(o#(' ut steadi(' to#a"ds AT since Su"'= @ @ ;ed< ;2/<8 Ta+ation in India 92, to 2: 1isto"'= Po(ic'= T"ends and Out(oo4= Indian Ta+ foundation= Ne# De($i 2 $tt*:###8ficci8co)s*docu)ent2207To#a" 208*df
THE GOODS AND SERVICES TAX BILL, 2016
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INDIRECT TAXATION PROJECT
97/ ut t$e s'ste) sti(( $ad )an' *"o(e)s (eading to a (o# ta+ GDP "atio8 Gi%ing so(ution to t$e *"o(e)s= t$e' suggested t$e int"oduction of CGST80 T$e "e*o"t said= t$e ta+ on se"%ices s$ou(d e fu((' integ"ated #it$ t$e e+isting CENAT on goods ' a )ode"n AT t'*e (e%' on a(( goods and se"%ices to e i)*osed ' t$e cent"a( go%e"n)ent ;CGST<8 T$e "e*o"t a(so ga%e t$e featu"es to e inc(uded in t$e design of CGST8 T$e conce*t of GST #as int"oduced in t$e Pa"(ia)ent fo" t$e fi"st ti)e on 3e"ua"' 27= 2/ ' P C$ida)a"a)= t$e t$en &nion 3@ in t$e &nion 6udget S*eec$ of 2/-8 1e "e)a"4ed= FIt is )' sense t$at t$e"e is a (a"ge consensus t$at t$e count"' s$ou(d )o%e to#a"ds a nationa( (e%e( GST t$at s$ou(d e s$a"ed et#een t$e Cent"e and t$e States8 I *"o*ose t$at #e set A*"i( = 2 as t$e date fo" int"oducing GST8 T$e #o"(d o%e"= goods and se"%ices att"act t$e sa)e "ate of ta+8 T$at is t$e foundation of a GST8! &nif'ing t$e ta+ st"uctu"e ac"oss States= t$e ne# sc$e)e of ta+ "egi)e #ou(d *a%e #a' fo" a co))on nationa( )a"4et fo" goods and se"%ices ;Se(ect Co))ittee Re*o"t= 2,<8 Acco"ding to t$e Re*o"t of Tas4 3o"ce on GST= t$e GST s$ou(d e st"uctu"ed on t$e destination *"inci*(e8 As a "esu(t= t$e ta+ ase #i(( s$ift f"o) *"oduction to consu)*tion #$e"e' i)*o"ts #i(( e (ia(e to ta+ and e+*o"ts #i(( e "e(ie%ed of t$e u"den of goods and se"%ice ta+8 Gi%en t$e ao%e t$e *"esent *a*e" see4s to $ig$(ig$t t$e "ationa(e of t$e GST in India= gauge t$e "ea( eneficia"ies and *in*oint sa(ient featu"es of t$e Constitutiona( A)end)ent ;22nd< 6i((= 2! ca((ed CA6 *assed in Bo4 Sa$a= d"a# out a co)*a"ison et#een cu""ent indi"ect s'ste) and *"o*osed GST and *oint out t$e a"gaining issues t$at sti(( act as i)*asse fo" t$e *assage of t$e CA6 in t$e Ra>'a Sa$a and its i)*(e)entation in t$e count"'8 T$e *"esent *a*e" is ased on t$e seconda"' sou"ces )ain(' t$e *u(is$ed Re*o"ts of Tas4 fo"ce= fi"st discussion *a*e" of e)*o#e"ed co))ittee of state finance )iniste"s= "e*o"ts of finance co))ission= constitution a)end)ent i((;s<= #o"4ing *a*e"s and %a"ious a"tic(es *u(is$ed in estee)ed ne#s*a*e"s etc8,
0 Su"'= @ @ ;ed< ;2/<8 Ta+ation in India 92, to 2: 1isto"'= Po(ic'= T"ends and Out(oo4= Indian Ta+ foundation= Ne# De($i ! 6i"d= Ric$a"d @8 ;22<8 T$e GST1ST: C"eating an integ"ated Sa(es Ta+ in a 3ede"a( Count"'8 T$e Sc$oo( of Pu(ic Po(ic'= SPP Resea"c$ Pa*e"s= ,;2<= -078 , Su*"a 08
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INDIRECT TAXATION PROJECT ST!!C#T!78 7 *ST
In t$e e+isting f"a)e#o"4 of Indian Constitution= t$e aut$o"it' to (e%' ot$ di"ect and indi"ect ta+es is di%ided et#een cent"a( go%e"n)ent and state go%e"n)ents8 Cent"a( go%e"n)ent (e%ies indi"ect ta+es suc$ as custo) dut' on i)*o"t on goods= e+cise duties on )anufactu"e of goods= cent"a( sa(es ta+ on inte"state t"ansactions and se"%ice ta+ on *"o%ision of s*ecified se"%ices= etc8= #$i(e t$e state go%e"n)ents (e%' a(ue Added Ta+ ;AT<= state e+cise= (u+u"' ta+es on $ote(= ent"' ta+oct"oi on t$e ent"' of goods in s*ecified a"eas= anci((a"' ta+es (i4e ente"tain)ent ta+es etc8 A(t$oug$ indi"ect ta+ st"uctu"e $as gone t$"oug$ se%e"a( "efo")s since 99 (i4e int"oduction of se"%ice ta+ in 99! and cent"a( %a(ue added ta+ ;CENAT< in 2 ' cent"a( go%e"n)ent and int"oduction of AT in 2,-/ ' state go%e"n)ent "e*(acing sa(es ta+ etc8= e)*$asis on )o%ing to#a"ds a neut"a( o" unifo") ta+ st"uctu"e is e(o# *a" t$e desi"ed (e%e(8 A funda)enta( f(a# of t$e *"esent indi"ect st"uctu"e is t$e )u(ti*(e ta+es (e%ied ' cent"a( go%e"n)ent and state go%e"n)ent at diffe"ent (e%e(s of su**(' c$ain8 T$is )u(ti*(icit' of ta+es at t$e State and Cent"a( (e%e(s $as "esu(ted in a co)*(e+ indi"ect ta+ st"uctu"e in t$e count"'8 3i"st= t$e"e is no unifo")it' of ta+ "ates and st"uctu"e ac"oss states8/ Second= t$e"e is cascading of ta+es due to ta+ on ta+8 No c"edit of e+cise dut' and se"%ice ta+ *aid at t$e stage of )anufactu"e is a%ai(a(e to t$e t"ade"s #$i(e *a'ing t$e State (e%e( sa(es ta+ o" AT= and %ice-%e"sa8 3u"t$e"= no c"edit of state ta+es *aid in one State can e a%ai(ed in ot$e" States8 1ence= t$e *"ices of goods and se"%ices get a"tificia((' inf(ated to t$e e+tent of t$is ta+ on ta+8 P"esent st"uctu"e $as cascading i)*act on cost of indigenous )anufactu"e of goods and se"%ices affecting t$e co)*etiti%eness of Indian indust"'8 3o" e+a)*(e AT is (e%ied on sa(e %a(ue of *"oduct= #$ic$ inc(udes e+cise dut' e(e)ent8 T$us AT is a(so c$a"ged on e+cised dut' e(e)ent= and %ice %e"sa8 Si)i(a"('= se"%ice ta+ is (e%ied on se"%ices and cent"a( sa(es ta+ is (e%ied on inte"-state sa(e of goods e%incing cascading of ta+es at eac$ stage in su**(' c$ain8
/ asant$ago*a(= D"8 R8 ;2<8 GST in India: A 6ig Bea* in t$e Indi"ect Ta+ation S'ste)8 Inte"nationa( Jou"na( of T"ade= Econo)ics and 3inance= 2;2<= !!-!/8 E)*o#e"ed Co))ittee of 3inance @iniste"s ;29<8 3i"st Discussion Pa*e" on Goods and Se"%ices Ta+ in India= T$e E)*o#e"ed Co))ittee of State 3inance @iniste"s= Ne# De($i8
THE GOODS AND SERVICES TAX BILL, 2016
INDIRECT TAXATION PROJECT
On t$e ot$e" $and= suc$ )u(ti*(e ta+es #it$ diffe"ent "ates and diffe"ent ta+ ases not on(' )a4e ta+ st"uctu"e $ig$(' co)*(icated= ut a(so )a4e it difficu(t to co)*(' and ad)iniste" "esu(ting in $ig$ co)*(iance cost= ta+ a"it"age= and #astage of ti)e and effo"ts8 Co)*(e+it' discou"ages ta+ co)*(iance and "eta"ds in%est)ent and econo)ic g"o#t$8 In t"ue sense= )u(ti*(e ta+es *"o%ide incenti%es fo" ta+ e%asion and unde")ine efficienc'8 Ta+ inefficiencies in do)estic ta+ st"uctu"e co)*e( go%e"n)ent to continue *o(ic' of $ig$ custo) dut' to *"otect do)estic indust"ies )a4ing India $ig$ cost econo)' and e+*o"ts (ess co)*etiti%e8 A(( t$ese #a""ant "e*(acing t$e *"esent "egi)e ' efficient= "ationa( Goods and Se"%ices Ta+ st"uctu"e= #$ic$ #ou(d e uo'ant too= #it$out distu"ing t$e count"'s fede"a( st"uctu"e87
CHAPTERS
6enefits of GST T$"ee )a>o" enefits #i(( f(o# f"o) t$e GST8 Firstly= as t$e P"i)e @iniste" out(ined in an inte"%ie#= t$e GST #i(( inc"ease t$e "esou"ces a%ai(a(e fo" *o%e"t' a((e%iation and de%e(o*)ent8 T$is #i(( $a**en indi"ect(' as t$e ta+ ase eco)es )o"e uo'ant and as t$e o%e"a(( "esou"ces of t$e Cent"a( and State go%e"n)ents inc"ease8 6ut it #i(( a(so $a**en di"ect(' ecause t$e "esou"ces of t$e *oo"est States H fo" e+a)*(e= &tta" P"ades$= 6i$a"= and @ad$'a P"ades$ H #$o $a**en to e (a"ge consu)e"s= #i(( inc"ease sustantia(('8 Second= t$e GST #i(( faci(itate @a4e in India ' )a4ing one India89 T$e cu""ent ta+ st"uctu"e un)a4es India= ' f"ag)enting Indian )a"4ets a(ong State (ines8 T$"ee featu"es of t$e cu""ent s'ste) cause t$ese disto"tions: t$e Cent"a( Sa(es Ta+ ;CST< on inte"-State sa(es of goods? nu)e"ous int"a-State ta+es? and t$e e+tensi%e natu"e of counte"%ai(ing dut' e+e)*tions t$at fa%ou"s i)*o"ts o%e" do)estic *"oduction8 In one fe(( s#oo*= t$e GST #ou(d "ectif' a(( t$ese disto"tions: t$e CST #ou(d e e(i)inated? )ost of t$e ot$e" ta+es #ou(d e susu)ed into t$e GST? and ecause t$e GST #ou(d e a**(ied on 7 Pa"4$i= S$i(*a8 Goods and Se"%ice Ta+ in India: t$e c$anging face of econo)'8 Ret"ie%ed f"o): $tt*:###8*a"4$iassociates8o"g4gstcfe8*df8 9 Ag"a#a(= Puneet ;2/--<8 Ana('sis of 22nd Constitutiona( A)end)ent 6i((8GT LA! "N "N#"A8 At$ena Ba# Associates8
THE GOODS AND SERVICES TAX BILL, 2016
INDIRECT TAXATION PROJECT
i)*o"ts= t$e negati%e *"otection fa%o"ing i)*o"ts and disfa%o"ing do)estic )anufactu"ing #ou(d e e(i)inated8 T$ir%ly = t$e GST #ou(d i)*"o%e H e%en sustantia((' H ta+ go%e"nance in t#o #a's8 T$e
fi"st "e(ates to t$e se(f-*o(icing incenti%e in$e"ent to a %a(ued-added ta+8 To c(ai) in*ut ta+ c"edit= eac$ dea(e" $as an incenti%e to "euest docu)entation f"o) t$e dea(e" e$ind $i) in t$e %a(ue-addedta+ c$ain8 P"o%ided t$e c$ain is not "o4en t$"oug$ #ide-"anging e+e)*tions= es*ecia((' on inte")ediate goods= t$is se(f-*o(icing featu"e can #o"4 %e"' *o#e"fu((' in t$e GST8 T$e second "e(ates to t$e dua( )onito"ing st"uctu"e of t$e GST H one ' t$e States and one ' t$e Cent"e8 C"itics and ta+*a'e"s $a%e %ie#ed t$e dua( st"uctu"e #it$ so)e an+iet'= fea"ing t#o sou"ces of inte"face #it$ t$e ta+ de*a"t)ent and $ence t#o *otentia( sou"ces of $a"ass)ent8 6ut dua( )onito"ing s$ou(d a(so e %ie#ed as c"eating desi"a(e ta+ co)*etition and coo*e"ation et#een State and Cent"a( aut$o"ities8 E%en if one set of ta+ aut$o"ities o%e"(oo4s ando" fai(s to detect e%asion= t$e"e is t$e *ossii(it' t$at t$e ot$e" o%e"seeing aut$o"it' )a' not8 Ot$e" enefits suc$ as t$e oost to in%est)ent $a%e een docu)ented in t$e Re*o"t on t$e Re%enue Neut"a( Rate t$at #as su)itted in Dece)e" (ast 'ea"8 Of cou"se= t$ese enefits #i(( on(' f(o# t$"oug$ a #e((-designed GST8 T$e GST s$ou(d ai) at ta+ "ates t$at *"otect "e%enue= si)*(if' ad)inist"ation= encou"age co)*(iance= a%oid adding to inf(ationa"' *"essu"es= and 4ee* India in t$e "ange of count"ies #it$ "easona(e (e%e(s of indi"ect ta+es82 3(a#s of GST T$e "e*o"t a(so u"ged t$at t$e GST e co)*"e$ensi%e in its co%e"age= t$at e+e)*tions f"o) t$e GST e (i)ited to a fe# co))odities t$at cate"ed to c(ea" socia( enefits= and t$at )ost co))odities e ta+ed at t$e standa"d "ate8 T$e"e is no f"ee (unc$ $e"e8 T$e"e is no esca*ing t$e fact t$at t$e )o"e t$e e+e)*tionse+c(usions= t$e $ig$e" #i(( e t$e standa"d "ate= #$ic$ cou(d affect *oo"e" consu)e"s8 So)e $a%e (e%e((ed t$e c$a"ge t$at t$e design of t$e GST is f(a#ed8 6ut t$e Ff(a#ed GST c$a"ge fai(s to a**"eciate $o# "efo")s actua((' occu"8 In no Ba%i= @o$an8 Rene#ed GST conce"ns8 T$& 'i% Bsi&ss Li& 8 5astu"i K Sons Btd8 GST in India8 *si&sss&t+.i8 2 A("ig$t Stone"idge G"ou* ;2/<8 ASG Ana('sis: IndiaLs GST E+*(ained8 .as$ington= DC: ASG8
THE GOODS AND SERVICES TAX BILL, 2016
2
INDIRECT TAXATION PROJECT
count"' is t$e GST H e%en toda' afte" )an' 'ea"s of i)*(e)entation H *e"fect= and #as t$e"efo"e uite f(a#ed at ince*tion8 In co)*(e+ s'ste)s= c$ange is int"oduced= (ea"ning f"o) i)*(e)entation ta4es *(ace= (eading to fu"t$e" and ette" c$ange80 T$at is #$at $a**ened #it$ t$e i)*(e)entation of t$e %a(ue-added ta+ ' t$e States and t$at is #$at #i(( $a**en #it$ t$e GST8 It is fa" ette" to sta"t and a((o# t$e *"ocess of endogenous c$ange to unfo(d o%e" ti)e t$an to #ait Godot-(i4e fo" t$e est ti)e and t$e est design efo"e it is int"oduced8! T$at said= #e )ust a(so e "ea(istic aout t$e ti)e f"a)e fo" assessing t$e GST8 T$e GST is fiendis$('= )ind-ogg(ing(' co)*(e+ to ad)iniste"8 Suc$ co)*(e+it' and (ags in GST i)*(e)entation "eui"e t$at an' e%a(uation of t$e GST H and an' conseuentia( decisions H s$ou(d not e unde"ta4en o%e" s$o"t $o"iMons ;sa' )ont$s< ut o%e" (onge" *e"iods= sa' onet#o 'ea"s8 In unde"standing GST s'ste)s a"ound t$e #o"(d= #e $a%e een st"uc4 ' $o# a)itious and $o# unde"-f(a#ed t$e Indian GST is8 GST-t'*e ta+es in (a"ge fede"a( s'ste)s a"e eit$e" o%e"(' cent"a(ised= de*"i%ing t$e su-fede"a( (e%e(s of fisca( autono)' ;Aust"a(ia= Ge")an'= and Aust"ia
THE GOODS AND SERVICES TAX BILL, 2016
0
INDIRECT TAXATION PROJECT
Cent"e= 29 States and 2 &nion Te""ito"ies of #ide(' di%e"gent inte"ests %ia a constitutiona( a)end)ent "eui"ing "oad *o(itica( consensus= affecting *otentia((' 8, )i((ion ta+ entities= and )a"s$a((ing t$e (atest tec$no(og' to use and i)*"o%e ta+ i)*(e)entation ca*ai(it'= is *e"$a*s "eat$ta4ing(' un*"ecedented in )ode"n g(oa( ta+ $isto"'8, So)eti)es= #e a"e insufficient(' a**"eciati%e of $o# )uc$ t$e count"' $as ac$ie%ed in co)ing to t$is *oint #it$ t$e GST8 As t$e P"i)e @iniste" suggested= c"edit s$ou(d go to a(( sta4e$o(de"s at t$e Cent"e and t$e States fo" $a%ing #o"4ed to#a"ds t$e GST8 T$e ti)e is "i*e to co((ecti%e(' seiMe t$is $isto"ic o**o"tunit'? not >ust ecause t$e GST #i(( decisi%e(' a(te" t$e Indian econo)' fo" t$e ette" ut a(so ecause t$e GST s')o(iMes Indian *o(itics and de)oc"ac' at its coo*e"ati%e= consensua( est8/
O**o"tunities: # 8 %89 T7 C#SC#9!8* %%CTS :
T$is #i(( e t$e )a>o" cont"iution of GST fo" t$e usiness and co))e"ce8 At *"esent= t$e"e a"e diffe"ent state (e%e( and cent"e (e%e( indi"ect ta+ (e%ies t$at a"e co)*u(so"' one afte" anot$e" on t$e su**(' c$ain ti(( t$e ti)e of its uti(iMation8 * R7)TH 7 R %%8% !8 S T#T%S #89 8!78 :
It is e+*ected t$at t$e int"oduction of GST #i(( inc"ease t$e ta+ ase ut (o#e"s do#n t$e ta+ "ates and a(so "e)o%es t$e )u(ti*(e *oint T$is= #i(( (ead to $ig$e" a)ount of "e%enue to ot$ t$e states and t$e union8 R %9C%S TR#8S#CT!78 C7STS #89 88%C%SS#R; )#ST#*%S :
If go%e"n)ent #o"4s in an efficient )ode= it )a' e a(so *ossi(e t$at a sing(e "egist"ation and sing(e co)*(iance #i(( suffice fo" ot$ SGST and CGST *"o%ided go%e"n)ent *"oduces effecti%e IT inf"ast"uctu"e and integ"ation of suc$ inf"ast"uctu"e of states (e%e( #it$ t$e union8 , E)*o#e"ed Co))ittee of State 3inance @iniste"s ;29<8 3i"st Discussion Pa*e" on GST= Go%e"n)ent of India= Ne# De($i8 / $tt*:###8ficci8co)s*docu)ent2207To#a"ds-t$e-GST-A**"oac$-Pa*e"-A*"i208*df
THE GOODS AND SERVICES TAX BILL, 2016
!
INDIRECT TAXATION PROJECT % #T!78 :
One of t$e g"eat ad%antages t$at a ta+*a'e" can e+*ect f"o) GST is e(i)ination of )u(ti*(icit' of ta+ation8 T$e "eduction in t$e nu)e" of ta+ation a**(ica(e in a c$ain of t"ansaction #i(( $e(* to c(ean u* t$e cu""ent )ess t$at is "oug$t ' e+isting indi"ect ta+ (a#s8 7 8% $ 7!8T S !8*<% T #> :
Anot$e" featu"e t$at GST )ust $o(d is it s$ou(d e one *oint sing(e ta+ation8 T$is a(so gi%es a (ot of co)fo"ts and confidence to usiness co))unit' t$at t$e' #ou(d focus on usiness "at$e" t$an #o""'ing aout ot$e" ta+ation t$at )a' c"o* at (ate" stage8 T$is #i(( $e(* t$e usiness co))unit' to decide t$ei" su**(' c$ain= *"icing )oda(ities and in t$e (ong "un $e(*s t$e consu)e"s eing goods co)*etiti%e as *"ice #i(( no (onge" e t$e function of ta+ co)*onents ut function of s$ee" usiness inte((igence and inno%ation8
R %9C%S #%R#*% T#> R9%8S :
&nde" GST )ec$anis)= t$e cost of ta+ t$at consu)e"s $a%e to ea" #i(( e ce"tain= and GST #ou(d "educe t$e a%e"age ta+ u"dens on t$e consu)e"s8 R %9C%S TH% C 7RR$T!78 :
It is one of t$e )a>o" *"o(e)s t$at India is o%e"#$e()ed #it$8 .e cannot e+*ect an't$ing sustantia( un(ess t$e"e e+ists a *o(itica( #i(( to "oot it out8 T$is #i(( e a ste* to#a"ds co""u*tion f"ee Indian Re%enue Se"%ice8 C$a((enges ) !TH R%S$%CT T7 T#> THR%SH7<9:
T$e t$"es$o(d (i)it fo" tu"no%e" ao%e #$ic$ GST #ou(d e (e%ied #i(( e one a"ea= #$ic$ #ou(d $a%e to e st"ict(' (oo4ed at8 3i"st of a((= t$e t$"es$o(d (i)it s$ou(d not e so (o# to ot$e" s)a((-sca(e t"ade"s and se"%ice *"o%ide"s8 It a(so inc"eases t$e a((ocation of go%e"n)ent "esou"ces fo" suc$ a *ett' a)ount of "e%enue #$ic$ )a' e )uc$ )o"e cost(' t$an t$e a)ount of "e%enue co((ected8 T$e fi"st i)*act of setting $ig$e" ta+ t$"es$o(d #ou(d natu"a((' (ead to (ess "e%enue to t$e go%e"n)ent as t$e )a"gin of ta+ ase
THE GOODS AND SERVICES TAX BILL, 2016
,
INDIRECT TAXATION PROJECT
s$"in4s? second it )a' $a%e on suc$ s)a(( and not so de%e(o*ed states #$ic$ $a%e set (o# t$"es$o(d (i)it unde" cu""ent AT "egi)e8 ) !TH R%S$%CT T7 8#TR% 7 T#>%S :
T$e ta+es t$at a"e gene"a((' inc(uded in GST #ou(d e e+cise dut'= counte"%ai(ing dut'= cess= se"%ice ta+= and state (e%e( ATs a)ong ot$e"s8 Inte"esting('= t$e"e a"e nu)e"ous ot$e" states and union ta+es t$at #ou(d e sti(( out of GST8 ) !TH R%S$%CT T7 8=%R 7 %8#CT=%8TS 7 ST#TT%S :
T$e"e #i(( t#o t'*es of GST (a#s= one at a cent"e (e%e( ca((ed Cent"a( GST ;CGST< and t$e ot$e" one at t$e state (e%e( - State GST ;SGST<8 As t$e"e see)s to $a%e diffe"ent ta+ "ates fo" goods and se"%ices at t$e Cent"a( Be%e( and at t$e State Be%e(= and fu"t$e" di%ision ased on necessa"' and ot$e" *"o*e"t' ased on t$e need= (ocation= geog"a*$' and "esou"ces of eac$ state8 ) !TH R%S$%CT T7 R#T%S 7 T#>#T!78 :
It is t"ue t$at a ta+ "ate s$ou(d e de%ised in acco"dance #it$ t$e states necessit' of funds8 .$ene%e" states fee( t$at t$e' need to "aise g"eate" "e%enues to fund t$e inc"eased e+*enditu"e= t$en= idea(('= t$e' s$ou(d $a%e *o#e" to decide $o# to inc"ease t$e "e%enue8 ) !TH R%S$%CT T7 T#> =#8#*%=%8T #89 !8R#STRCTR% :
It de*ends on t$e states and t$e union $o# t$e' a"e going to )a4e GST a si)*(e one8 Success of an' ta+ "efo") *o(ic' o" )anage"ia( )easu"es de*ends on t$e in$e"ent si)*(ifications of t$e s'ste)= #$ic$ (eads to t$e $ig$ confo")it' #it$ t$e ad)inist"ati%e )easu"es and *o(icies8
I@PACT O3 GST ON ARIO&S SECTORS= STA5E1OBDERS
AND CBASSES
T$e GST i(( as of no#= $as *assed t$e (ast stages of c(ea"ing t$e Ra>'a Sa$a $u"d(e8 @ost ana('sts suggest t$at f"o) a )ac"o-econo)ic *e"s*ecti%e= #$i(e t$e s$o"t-te") i)*act of GST cou(d e )i+ed= t$e (ong-te") i)*act #i(( e *ositi%e8 T$e i(( is 'et to e enacted #$ic$ is tentati%e(' f"o) t$e fi"st da' of t$e 'ea" 28
THE GOODS AND SERVICES TAX BILL, 2016
/
INDIRECT TAXATION PROJECT
F6esides si)*(if'ing t$e indi"ect ta+ st"uctu"e= GST s$ou(d a(so $e(* to c"eate LOne IndiaL #it$ a unified ta+ "egi)e ' e(i)inating geog"a*$ica( f"ag)entation8 It #i(( "e)o%e t$e cu""ent cascading of ta+es ' ensu"ing t$e sea)(ess f(o# of in*ut c"edit ac"oss t$e %a(ue c$ain of ot$ goods and se"%ices as suggested ' %a"ious )u(ti-nationa( ana('sis "e*o"t8 It is e(ie%ed ' )an' econo)ists and financia( ad%iso"s t$at #$i(e in t$e (ong-"un GST #i(( $a%e a *ositi%e i)*act on inf(ation and go%e"n)ent finances= in t$e nea"-te")= inf(ation is (i4e(' to go u* and go%e"n)ent finances a"e (i4e(' to e st"ained due to co)*ensation to states87 H 7) !T !S *7!8* T7 #%CT #R!7S ! 89STR!%S #89 S %CT7RS
Auto)oi(es FBa"ge(' *ositi%e fo" de)and= as it #i(( (ead to a - *e" cent fa(( in *"ices= assu)ing an 7 *e" cent GST "ate8 @a"gin enefits to acc"ue fo" t"acto"s= as t$ese can c(ai) set-off against ta+es *aid on in*ut8 O"ganised atte"' and ot$e" s*a"es #ou(d eco)e )o"e cost co)*etiti%e and gain )a"4et s$a"e89 S%3/" i&(#/%: Positi%e fo" @a"uti SuMu4i= 1e"o @otoCo"*= E+ide= A)a"a Ra>a= Eic$e"
@oto"= @a$ind"a K @a$ind"a= 6a>a> Auto8 Negati%e fo" As$o4 Be'(and 3@CG FDes*ite of t$e econo)ic s(o#do#n= IndiaLs 3ast @o%ing Consu)e" Goods ;3@CG< $as g"o#n consistent(' du"ing t$e *ast t$"ee fou" 'ea"s "eac$ing to 2, i((ion at "etai( sa(es in 278 I)*(e)entation of *"o*osed GST and o*ening of 3o"eign Di"ect In%est)ent ;38D8I8< a"e e+*ected to fue( t$e g"o#t$ and "aise indust"'Ls siMe to 9, 6i((ion ' 270,8 GST #i(( e *ositi%e fo" $ouse$o(d and *e"sona( ca"e s*ace= as t$e effecti%e ta+ "ate "educes ' 2-, asis *oints ;*s<= a*a"t f"o) "educing #a"e$ousing and (ogistica( "eui"e)ents8 D"8 P"a4as$ @8 1e"e4a"8 ;22<8 E%a(uation of i)*act of Goods and Se"%ice Ta+ ;GST<8 Indian St"ea)s Resea"c$ Jou"na(8 7 6and'o*ad$'a'= S8 N8 ;n8d8<8 A P"i)e" on Goods and Se"%ices Ta+ in India8 SSRN E(ect"onic Jou"na(8 doi:8209ss"n822/0 9 T$e Institute of Co)*anies Sec"eta"ies of India ;ICSI< ;2,<8 Refe"ence" on Goods and Se"%ice Ta+8 Ret"ie%ed f"o): $tt*s:###8icsi8eduDocs.esiteGSTQRefe"ence"8*df
THE GOODS AND SERVICES TAX BILL, 2016
INDIRECT TAXATION PROJECT
1o#e%e"= #o"4ing ca*ita( fo" "etai(e"s= and additiona( ta+ "ates fo" >e#e((e"' and ciga"ette )anufactu"e"s a"e negati%es82 S%3/" i&(#/%: Positi%e fo" 1industan &ni(e%e"= E)a)i= God"e> Consu)e"8 Negati%e fo"
Titan= 6ata= ITC Bogistics Passage of GST #i(( (ead to e(i)ination of cent"a( sa(es ta+ and inte"-state %a(ue-added ta+ a"it"age *ossii(ities8 T$is #i(( (ead to conso(idation of #a"e$ouses and inc"eased efficiencies in t$e (ogistics c$ain8 S%3/" i&(#/%: Positi%e fo" Containe" Co"*o"ation of India= Adani SE= Gu>a"at Pi*a% Po"t
;(onge" te")< Inf"ast"uctu"e C(a"it' on #o"4s cont"act ta+ation is t$e 4e' enefit fo" t$e secto"8 T$is cou(d "educe (itigation= as it e(i)inates t$e diffe"ence et#een sa(es and se"%ices8 S%3/" i&(#/%: Positi%e fo" Ba"sen K Tou"o ;BKT<
Consu)e" du"a(es Consu)e" du"a(es #i(( enefit f"o) i)*"o%ed (ogistics8 Di"ect enefits u* to 2-0 *s in cost sa%ings )a' acc"ue8 A significant *o"tion of di"ect enefits #i(( e *assed on to end consu)e"s ecause of a $ig$(' co)*etiti%e )a"4et8 S%3/" i&(#/%: Positi%e fo" o(tas= 1a%e((s= C"o)*ton G"ea%es
Oi( K gas 5e' *et"o(eu) *"oducts (i4e c"ude= natu"a( gas= $ig$ s*eed diese( and AT3 $a%e een 4e*t out of GST8 C(a"it' is a#aited fo" ot$e"s8 Co)*(iance costs a"e (i4e(' to "ise ecause of dua( indi"ect ta+ )ec$anis)8 S%3/" i&(#/%: Neut"a(8 Do not fo"esee an' )eaningfu( c$ange on oi( K gas co)*anies
Ce)ent 2 Indi"ect Ta+es Co))ittee= Institute of C$a"te"ed Accountants of India ;ICAI< ;2,<8 Goods and Se"ice Ta+ ;GST<8 Ret"ie%ed f"o): $tt*:idtc8icai8o"gdo#n(oad3ina(-PPT-onGST-ICAI8*df8
THE GOODS AND SERVICES TAX BILL, 2016
7
INDIRECT TAXATION PROJECT
O%e"a(( ta+ incidence on t$e secto" cou(d dec(ine8 T$e secto" #i(( a(so enefit f"o) e+*ected dec(ine in (ogistic costs8 3i")s can e e+*ected to *ass on t$e enefits= gi%en t$at de)and and *(ant uti(isation (e%e(s a"e *ic4ing u*8 S%3/" i&(#/%: Positi%e fo" )ost co)*anies
.ind *o#e" FGST #i(( e negati%e fo" #ind= tu"ine gene"ato" )anufactu"es (i4e SuM(on and Ino+.ind= as *"essu"e on de%e(o*e" )a"gins and inte"na( "ates of "etu"n cou(d e%entua((' fo"ce "eduction in *"ices and "ea(isations= u* to -0 *e" cent8 1o#e%e"= if co)*onents a"e inc(uded in t$e e+e)*tion (ist= t$e i)*act of GST #i(( e nu((ified82 S%3/" i&(#/%: Negati%e fo" SuM(on= Ino+ .ind
&ti(ities FE+c(usion of Fsa(e of e(ect"icit' f"o) GST cou(d *otentia((' "aise t$e cost of coa(-fi"ed and "ene#a(e ene"g' fo" Disco)s8 P"ofitai(it' of inde*endent *o#e" *"oduce"s se((ing %ia )ediu)(ong-te") PPAs is un(i4e(' to e dented as cost esca(ation #ou(d (i4e(' e *assed on822 S%3/" i&(#/%: Positi%e fo" CESC= negati%e fo" JS. Ene"g'
P$a")aceutica(s GST "o((out cou(d e negati%e fo" t$e secto"= as it is (i4e(' to inc"ease indi"ect ta+8 Ana('sts sa' indi"ect ta+es *aid ' *$a")a co)*anies cou(d inc"ease ' / *e" cent and @RP ' fou" *e" cent8 S%3/" i&(#/%: Negati%e fo" A(4e)= G(a+o P$a")a
FT$e GST= #$ic$ is e+*ected to e i)*(e)ented f"o) A*"i( = 2= ai)s to "e*(ace )u(ti*(e state and cent"a( (e%ies #it$ a sing(e ta+8 Since t$e cent"a( and state ta+es a"e (i4e(' to e susu)ed unde" GST= it )a' "esu(t in fungii(it' of ta+ c"edits ac"oss int"a- and inte"-state 2 1o# t$e GST 6i(( #i(( i)*act %a"ious secto"s and stoc4s 6usiness Standa"d Ne#s8 ;2/= Ju(' /<8 Ret"ie%ed f"o) $tt*:###8usiness-standa"d8co)a"tic(e)a"4ets$o#-t$egst-i((-#i((-i)*act-%a"ious-secto"s-and-stoc4s-/72,9Q8$t)( 22 Iid8
THE GOODS AND SERVICES TAX BILL, 2016
9
INDIRECT TAXATION PROJECT
t"ansactions8 Conseuent('= diffe"ent indust"ies )a' need to conduct a cost-enefit ana('sis in te")s of a**(ica(e in*ut and out*ut ta+es820 Rea( estate FT"ansfe" of ;co)*(eted< *"o*e"ties )a' continue to e outside t$e *u"%ie# of GST and e (ia(e on(' to a**(ica(e sta)* duties8 In case t$is secto" is "oug$t #it$in t$e a)it of GST= it is (i4e(' to "esu(t in t"ans*a"enc'= #$ic$ #i(( significant(' "educe ta+ e%asion t$"oug$ )o"e efficient t"ansaction-t"ac4ing )et$ods= and i)*"o%ed enfo"ce)ent and co)*(iance8 Since GST )a' e (e%ied on a sing(e %a(ue= t$e cu""ent issue of (e%'ing ta+ on ta+ ;AT on cent"a( e+cise dut'< is (i4e(' to e "e)o%ed8 At *"esent= de%e(o*e"s *a' %a"ious non-c"edita(e ta+es on su**(ies8 GST )a' "e*(ace t$ese )u(ti*(e ta+es #it$ a sing(e ta+? c"edit on su**(ies )a' a(so e a%ai(a(e= t$us "educing costs fo" a(( *(a'e"s8 1o#e%e"= if "ea( estate out*ut is e+e)*ted= t$en in*ut GST c"edit cou(d e a sustantia( cost fo" t$e secto"= "esu(ting in (oc4age of c"edit and $ig$e" costs to end consu)e"s82! 3inancia( se"%ices FIn India= )ost of t$e an4ing and financia( se"%ices a"e e+*osed to se"%ice ta+= at t$e "ate of !8, *e"cent= #$i(e GST is e+*ected to e 7 *e"cent to 2 *e"cent8 T$us= se"%ices a"e (i4e(' to get cost(ie"8 GST )a' )a4e t$ings cu)e"so)e as financia( se"%ice *"o%ide"s )a' e "eui"ed to ad$e"e to co)*(iances ac"oss )u(ti*(e states instead of t$e cu""ent sing(e= cent"a(ised "egist"ation co)*(iances8 A(so= as GST is a destination-ased ta+= it )ig$t e a c$a((enge to dete")ine t$e destination of ce"tain se"%ices ;at *"esent= se"%ices a"e ta+ed at t$e *(ace of "ende"ing t$e se"%ice<8 T$is
20 India8 I)*(e)entation of a(ue Added Ta+ in India: Bessons fo" T"ansition to Goods and Se"%ices Ta+ : a Stud' Re*o"t8 Ne# De($i: Co)*t"o((e" and Audito" Gene"a( of India= 28 2! India8 I)*(e)entation of a(ue Added Ta+ in India: Bessons fo" T"ansition to Goods and Se"%ices Ta+ : a Stud' Re*o"t8 Ne# De($i: Co)*t"o((e" and Audito" Gene"a( of India= 28
THE GOODS AND SERVICES TAX BILL, 2016
2
INDIRECT TAXATION PROJECT
)a' (ead to a difficu(t' in dete")ining state GST= cent"a( GST o" inte"-state GST on 626 and 62C t"ansactions8 Inte"est on (oans= t"ading in secu"ities= fo"eign cu""enc' and "etai( se"%ices a"e a(so e+*ected to fa(( #it$in t$e a)it of GST8 Reco))endations ' t$e an4ing indust"' suggest t$at suc$ se"%ices and inco)e s$ou(d not co)e unde" GST8 It is sti(( to e seen #$et$e" t$ese "eco))endations #i(( e acce*ted82, O%e"a((= it a**ea"s t$at i)*osing GST on an4ing and financia( se"%ices )a' eco)e a c$a((enge and India= if successfu(= #i(( c$a"t a ne# cou"se= #$ic$ cou(d #e(( eco)e a )ode( fo" t$e "est of t$e #o"(d8 In )ost of t$e count"ies GST is not c$a"ged on t$e financia( se"%ices8 E+a)*(e= In Ne# ea(and )ost of t$e se"%ices co%e"ed e+ce*t financia( se"%ices as GST8 &nde" t$e se"%ice ta+= India $as fo((o#ed t$e a**"oac$ of "inging %i"tua((' a(( financia( se"%ices #it$in t$e a)it of ta+ #$e"e conside"ation fo" t$e) is in t$e fo") of an e+*(icit fee8 GST a(so inc(ude financia( se"%ices on t$e ao%e g"ounds on('82/ T"a%e(= Tou"is) and 1os*ita(it' FIndias t"a%e(= tou"is) and $os*ita(it' indust"ies $a%e )u(ti*(e ta+es= (e%ied ' ot$ t$e cent"e and t$e states8 It is e+*ected t$at unde" GST= su**(ies of $ote(s and "estau"ants #i(( e su>ected to a sing(e ta+8 At *"esent= no c"edit is a%ai(a(e on in*ut se"%ices "e(ated to "eno%ation o" const"uction of $ote(s and "eso"ts8 T$is is e+*ected to c$ange unde" GST8 RKD cess= *a'a(e on f"anc$ise fees and tec$nica( 4no#-$o#= is (i4e(' to e susu)ed unde" GST= t$us si)*(if'ing co)*(iance *"ocedu"es and "educing )u(ti*(e ta+es8 1o#e%e"= it is unc(ea" #$et$e" %a"ious enefits a%ai(a(e unde" t$e e+isting 3o"eign T"ade Po(ic' #i(( continue unde" GST8 If suc$ enefits a"e *"o%ided= in*ut c"edit )a' not e a%ai(a(e= "esu(ting in $ig$e" costs8
2, @at$u"= i$a8 3o"eign T"ade of India= 9!-2= T"ends= Po(icies= and P"os*ects8 Ne# De($i: Ne# Centu"' Pu(ications= 2/8 2/ is#anat$an= 68 ;2/<8 Goods and se"%ices ta+ ;GST< in India8
THE GOODS AND SERVICES TAX BILL, 2016
2
INDIRECT TAXATION PROJECT
On t$e #$o(e= GST is (i4e(' to e(i)inate )u(ti*(icit' of ta+es and (ac4 of c"edits8 1o#e%e"= it )a' a(so (ead to inc"ease in ta+ "ates82 1ea(t$ca"e K @edica( faci(ities FOne of t$e )a>o" conce"ns of t$is indust"' is t$e cu""ent in%e"ted dut' st"uctu"e t$at ad%e"se(' affects do)estic )anufactu"e"s= cost of in*uts eing $ig$e" t$an out*ut8 T$is discou"ages in%est)ent in t$is indust"'8 GST )a' eit$e" "e)o%e t$e in%e"ted dut' st"uctu"e o" a((o# "efund of accu)u(ated c"edit8 T$is #ou(d e a oon fo" t$is indust"' and can act as its g"o#t$ cata('st8 T$e cu""ent cascading ta+ st"uctu"e on i)*o"t dut' )a4es it e+*ensi%e fo" t$e indust"' to i)*o"t )ac$ine"'8 GST is (i4e(' to "educe t$is cost8 T$is secto" en>o's se%e"a( ta+ e+e)*tions and enefits8 It is sti(( not c(ea" #$et$e" t$ese enefits #i(( continue unde" GST8 1ea(t$ insu"ance and diagnostic cent"es= #$ic$ a"e )ain(' se"%ice-o"iented= )a' fa(( unde" $ig$e" ta+ "ates= t$e"e' )a4ing suc$ se"%ices )o"e e+*ensi%e fo" consu)e"s827 A(co$o(ic e%e"ages FA(co$o( fo" $u)an consu)*tion is *"o*osed to e 4e*t outside t$e GST "egi)e= and #i(( $ence continue to att"act state e+cise and AT? $o#e%e"= in*uts a"e (i4e(' to fa(( unde" t$e a)it of GST8 Conseuent('= t$e"e )a' e (oc4age of in*ut c"edit= (eading to inc"eased *"oduction cost and inefficienc' in *"oduction and dist"iution8 1ig$e" in*ut costs and its cascading effect on ta+es )a' *us$ *"ices u*#a"ds= and )a' a(so $it e+*o"ts8 Restau"ants and a"s se"%ing a(co$o(= and se((ing ot$ GST and non-GST *"oducts= )a' e "eui"ed to unde"ta4e dua( co)*(iance ;fo" GST and non-GST *"oducts<829 2 @at$u"= i$a8 3o"eign T"ade of India= 9!-2= T"ends= Po(icies= and P"os*ects8 Ne# De($i: Ne# Centu"' Pu(ications= 2/8 27 Rao= R8 5a%ita8 Goods and Se"%ices Ta+ fo" India8 Ne# De($i: Nationa( Institute of Pu(ic 3inance and Po(ic'= 278 29 o"a= Adit'a8 Bast )odified August 0= 2/8 ###8t$estates)an8co)ne#so*iniongsti)*act-on-ene"g'-secto",978$t)(8
THE GOODS AND SERVICES TAX BILL, 2016
22
INDIRECT TAXATION PROJECT
Education FT$e education secto" cu""ent(' en>o's %a"ious ta+ e+e)*tions and enefits? se"%ices *"o%ided ' sc$oo(s and co((eges a"e eit$e" not ta+ed o" a"e co%e"ed in t$e negati%e (ist8 T$e situation is (i4e(' to continue e%en afte" t$e i)*(e)entation of GST8 In case it doesnt= t$e secto" )a' e a(e to a%ai( of in*ut c"edit o" CENAT c"edit on t$e dut' *aid on *u"c$ase of in*uts and se"%ices8 T$ese a"e (i4e(' to "ing do#n t$e fina( cost fo" t$e indust"'80 3ood Indust"' FT$e a**(ication of GST to food ite)s #i(( $a%e a significant i)*act on t$ose #$o a"e (i%ing unde" susistence (e%e(8 6ut at t$e sa)e ti)e= a co)*(ete e+e)*tion fo" food ite)s #ou(d d"astica((' s$"in4 t$e ta+ ase8 3ood inc(udes g"ains and ce"ea(s= )eat= fis$ and *ou(t"'= )i(4 and dai"' *"oducts= f"uits and %egeta(es= cand' and confectiona"'= snac4s= *"e*a"ed )ea(s fo" $o)e consu)*tion= "estau"ant )ea(s and e%e"ages8 E%en if t$e food is #it$in t$e sco*e of GST= suc$ sa(es #ou(d (a"ge(' "e)ain e+e)*t due to s)a(( usiness "egist"ation t$"es$o(d8 Gi%en t$e e+e)*tion of food f"o) CENAT and ! AT on food ite)= t$e GST unde" a sing(e "ate #ou(d (ead to a dou(ing of ta+ u"den on food80 1ousing and Const"uction Indust"' In India= const"uction and 1ousing secto" need to e inc(uded in t$e GST ta+ ase ecause const"uction secto" is a significant cont"iuto" to t$e nationa( econo)'8 Rai( Secto" FT$e"e $a%e een suggestions fo" inc(uding t$e "ai( secto" unde" t$e GST u)"e((a to "ing aout significant ta+ gains and #iden t$e ta+ net so as to 4ee* o%e"a(( GST "ate (o#8 T$is #i(( $a%e t$e added enefit of ensu"ing t$at a(( inte" state t"ans*o"tation of goods can e t"ac4ed t$"oug$ t$e *"o*osed Info")ation tec$no(og' ;IT< net#o"4802 0 Sa*"a= 6i*in8 Education Secto" GST India-Goods and Se"%ices Ta+ in India8 GST India-Goods and Se"%ices Ta+ in India ou" 3"ee-ta+ Site8 Bast )odified Janua"' 2= 2/8 $tt*:###8gstindia8co)tageducation-secto"8 0 Su*"a note 2/8 02 Secto" i)*act: GSTLs effect on "oads= "ai(#a's and *o"ts - Inf"aci"c(e8 ;2/= Se*te)e" <8 Ret"ie%ed f"o) $tt*:###8%cci"c(e8co)inf"aci"c(esecto"-i)*act-gst-#i((-affect-"oads"ai(#a's-*o"ts8 Bast seen on= 7 Aug 2/8
THE GOODS AND SERVICES TAX BILL, 2016
20
INDIRECT TAXATION PROJECT
Info")ation Tec$no(og' ena(ed se"%ices FTo e in s'nc #it$ t$e est Inte"nationa( *"actices= do)estic su**(' of soft#a"e s$ou(d a(so att"act G8S8T8 on t$e asis of )ode of t"ansaction8 1ence if t$e soft#a"e is t"ansfe""ed t$"oug$ e(ect"onic fo")= it s$ou(d e conside"ed as Inte((ectua( P"o*e"t' and "ega"ded as a se"%ice8 And if t$e soft#a"e is t"ans)itted on )edia o" an' ot$e" tangi(e *"o*e"t'= t$en it s$ou(d e t"eated as goods and su>ect to G8S8T800 I)*act on S)a(( Ente"*"ises FT$e"e #i(( e t$"ee catego"ies of S)a(( Ente"*"ises in t$e GST "egi)e8 T$ose e(o# t$"es$o(d need not "egiste" fo" t$e GST8 T$ose et#een t$e t$"es$o(d and co)*osition tu"no%e"s #i(( $a%e t$e o*tion to *a' a tu"no%e" ased ta+ o" o*t to >oin t$e GST "egi)e8 T$ose ao%e t$"es$o(d (i)it #i(( need to e #it$in f"a)e#o"4 of GST Possi(e do#n#a"d c$anges in t$e t$"es$o(d in so)e States conseuent to t$e int"oduction of GST )a' "esu(t in o(igation eing c"eated fo" so)e dea(e"s8 In t$is case conside"a(e assistance is desi"ed8 In "es*ect of Cent"a( GST= t$e *osition is s(ig$t(' )o"e co)*(e+8 S)a(( sca(e units )anufactu"ing s*ecified goods a"e a((o#ed e+e)*tions of e+cise u*to Rs8 8, C"o"es8 T$ese units )a' e "eui"ed to "egiste" fo" *a')ent of GST= )a' see t$is as an additiona( cost80! H 7) !T )!<< #%CT 9!%R%8T !8#8C!#< #CT!!T!%S S3+)/i$
Inte"-State *"ocu"e)ent cou(d *"o%e %ia(e T$is )a' o*en o**o"tunities to conso(idate su**(ie"s%endo"s Additiona( dut'CD and S*ecia( Additiona( dut' co)*onents of custo)s dut' to e "e*(aced8
Di%)ib+%i3$
C$anges in ta+ s'ste) cou(d #a""ant c$anges in ot$ *"ocu"e)ent and dist"iution a""ange)ents Cu""ent a""ange)ents fo" dist"iution of finis$ed goods )a'
00 An o%e"%ie# of t$e "ecent(' *assed Goods and Se"%ices Ta+ ;GST< 6i(( - T$e 1indu8 ;2/= August 2<8 Ret"ie%ed f"o) $tt*:###8t$e$indu8co)featu"es$o)es-and-ga"densano%e"%ie#-of-t$e-"ecent('-*assed-goods-and-se"%ices-ta+-gst-i((a"tic(e799/98ece 0! Due= J8 38 ;9<8 Indi"ect ta+ation in de%e(o*ing econo)ies: T$e "o(e and st"uctu"e of custo)s duties= e+cises= and sa(es ta+es8 6a(ti)o"e: Jo$ns 1o*4ins P"ess8
THE GOODS AND SERVICES TAX BILL, 2016
2!
INDIRECT TAXATION PROJECT
no (onge" e o*ti)a( #it$ t$e "e)o%a( of t$e conce*t of e+cise dut' on )anufactu"ing Cu""ent net#o"4 st"uctu"e and *"oduct f(o#s )a' need "e%ie# and *ossi(e a(te"ation P)i/i$
Ta+ sa%ings "esu(ting f"o) t$e GST st"uctu"e #ou(d "eui"e
#$4
()35i%#bi'i%9
"e*"icing of *"oducts @a"gins o" *"ice )a"4-u*s #ou(d a(so need to e "ee+a)ined Re)o%a( of t$e conce*t of e+cise dut' on )anufactu"ing can
C#h 5'3
"esu(t in i)*"o%e)ent in cas$ f(o# and in%ento"' costs as GST #ou(d no# e *aid at t$e ti)e of sa(esu**(' "at$e" t$an at t$e ti)e o" "e)o%a( of goods f"o) t$e facto"'8
Potentia( c$anges to accounting and IT s'ste)s in a"eas of
S9%!& /h#$! #$4 %)#$#/%i3$
)aste" data= su**(' c$ain t"ansactions= s'ste) design E+isting o*en t"ansactions and a(ances as on t$e cut-off
&#$#!&!
%$date need to e )ig"ated out to ensu"e s)oot$ t"ansition to GST C$anges to su**(' c$ain "e*o"ts ;e8g8= *u"c$ase "egiste"= sa(es "egiste"= se"%ices "egiste"<= ot$e" ta+ "e*o"ts and fo")s ;e8g8= in%oices= *u"c$ase o"de"s< need "e%ie# A**"o*"iate )easu"es suc$ as t"aining of e)*(o'ees= co)*(iance unde" GST= custo)e" education= and t"ac4ing of in%ento"' c"edit a"e needed to ensu"e s)oot$ t"ansition to t$e GST "egi)e T$e ao%e figu"es a"e a cou"tes' of De((oitte India80, H 7) !T #%CTS #R!7S S T#?%H7<9%RS
Co"*o"ations and ot$e" functiona"ies
0, Ra#at D= LGoods and Se"%ices Ta+ in India: Ta4ing Stoc4 and Setting E+*ectationsL ;2/< U$tt*:###28de(oitte8co)contentda)De(oitteinDocu)entsta+in-ta+-gst-in-indiata4ing-stoc4-noe+*8*dfV accessed 2! August 2/8
THE GOODS AND SERVICES TAX BILL, 2016
2,
INDIRECT TAXATION PROJECT
FT$e )iniste" egan $is s*eec$ ' e)*$asiMing t$e need to "e%i%e g"o#t$ and in%est)ent to ensu"e >o c"eation fo" t$e 'out$8 As e+*ected $e )entioned $is intent on i)*(e)entation of GST f"o) t$e ne+t 'ea"8 1o#e%e" t$e )ost i)*o"tant announce)ent #as in "e(ation to ta+ "ates= t$e finance )iniste" *"o*osed to "educe t$e "ate of co"*o"ate ta+ f"o) 0 to 2, o%e" t$e ne+t 'ea" ! 'ea"s8 It is a #e(co)e decision and )ust $a%e )ade t$e co)*anies $a**'= $o#e%e" in $is s*eec$ t$e )iniste" a(so )entioned t$at t$is *"ocess of "eduction $as to e necessa"i(' acco)*anied ' "ationa(iMation and "e)o%a( of %a"ious 4inds of ta+ e+e)*tions and incenti%es fo" co"*o"ate ta+ *a'e"s= #$ic$ account fo" (a"ge nu)e" of ta+ dis*utes8 .$at #ou(d e i)*o"tant to see is #$at e+e)*tions and incenti%es does t$e go%e"n)ent #i(( do a#a' #it$80/ It cou(d e a c(assic case of gi%ing so)et$ing f"o) one $and and ta4ing it ac4 f"o) t$e ot$e"8 3u"t$e" o#ing to t$e in%esto" senti)ents and t$e go%e"n)ents intent to en$ance in%est)ents= a**(icai(it' of GAAR $as een defe""ed ' t#o 'ea"s and it #as )entioned t$at #$en i)*(e)ented= GAAR #ou(d a**(' *"os*ecti%e('8 .e a(so see a *"o*osa( to "educe t$e "ate of inco)e ta+ on "o'a(t' and fees fo" tec$nica( se"%ices f"o) 2, to #it$ intent to encou"age ne# %entu"es in India8 T$e t$"es$o(d (i)it fo" do)estic t"ansfe" *"icing is a(so inc"eased f"o) , C" to 2 C"8 Ao(ition of #ea(t$ ta+ is a #e(co)e )o%e= ut no# detai(s of #ea(t$ $a%e to e "e*o"ted in inco)e ta+ "etu"ns8 1a%e to #ait and see #$et$e" t$e "etu"n fi(ing eco)es co)*(e+ o" not80 .$at it )eans fo" t$e co))on )an FT$e co))on )an #as e+*ecting a "ise in t$e ta+ e+e)*tion (i)its= so it #as a disa**oint)ent to see t$e (i)its "e)ain unc$anged8 T$e )iniste" in $is s*eec$ )entioned enefits to )idd(e c(ass ta+*a'e"s as one of t$e "oad t$e)es= and $a%e )ade ce"tain *"o*osa(s #$ic$ a"e %e"' #e(co)e8 A)ong t$e) a"e •
"r&s& i %&%ti liit %&r & 0# t Rs 25000 % 4r s&ir iti&s t Rs 30000.
0/ 5u)a"= Nitin ;2!<8 Goods and Se"%ices Ta+ in India: A .a' 3o"#a"d8 G(oa( Jou"na( of @u(tidisci*(ina"' Studies= 0;/<= 2/-22, 0 D$ana$a4'a)= @8= K Geet$a= S8 ;27<8 Indi"ect ta+ation8 Ne# De($i: Se"ia(s Pu(ications8
THE GOODS AND SERVICES TAX BILL, 2016
2/
INDIRECT TAXATION PROJECT
•
#&%ti 4 Rs 50000 4r tri*ti t N& P&si s$&& %&r 0CC#. "r&s& i liit %&%ti t 4 +&si 4% % & +&si s$&& t
•
Rs 1 50000. "r&s& i trs+rt ll& &&+ti t Rs 1600 +&r t$.
•
A(t$oug$ t$e ao%e c$anges #i(( $e(* an indi%idua( "educe $is ta+ (iai(it'= ut it doesnt inc"ease $is dis*osa(e inco)e807 3u"t$e" #e a(so see a "ise in se"%ice ta+ "ates to !83u"t$e" an ena(ing *"o%ision is )ade to e)*o#e" t$e Cent"a( Go%e"n)ent to i)*ose a S#atc$ 6$a"at cess on a(( o" ce"tain ta+a(e se"%ices at a "ate of 28 .$ic$ )ean t$at t$e effecti%e "ate of se"%ice ta+ #i(( inc"ease to /8 Need(ess to sa' it #i(( i)*act t$e )idd(e c(ass as essentia( se"%ices #i(( eco)e cost(ie"8 Not good fo" t$e )idd(e c(ass *eo*(e= since e+e)*tion (i)its "e)ain sa)e no inc"ease in dis*osa(e inco)e ut e+*enses on )o%ies= $ote(s= t"a%e(= (ega(= an4ing = "estau"ants etc a(( #i(( inc"ease809 .$at it )eans fo" t$e econo)': FT$e intent of t$e udget is %e"' c(ea"= t$e go%e"n)ent #ants to encou"age setting u* of usiness in India and #ants to faci(itate t$e ease of doing usiness a(so8 G"o#t$ of indust"ies in India is necessa"' fo" >o c"eation and as e+*ected t$e focus is on encou"age)ent to co"*o"ate8 T$e go%e"n)ent ' gi%ing enefits in t$e fo") of deductions "at$e" t$an inc"easing t$e e+e)*tion (i)its to indi%idua(s $ad s$o#n t$at its intent is to inc"ease t$e a)ount a%ai(a(e fo" in%est)ents and not to inc"ease s$o"t te") de)ands8 T$is is in (ine #it$ its st"ateg' of en$ancing in%est)ents8! 07 India @a4es P"og"ess on GST I)*(e)entation - India 6"iefing Ne#s8 ;n8d8<8 Ret"ie%ed f"o) $tt*:###8india-"iefing8co)ne#sindian-gst-dea(-*a%es-ta+-"efo")s-79078$t)( 09GST 6i((: States to get "e(ief T$e 1indu8 Ret"ie%ed f"o) $tt*:###8t$e$indu8co)usinessEcono)'gst-i((-states-to-get-"e(iefa"tic(e//9708ece ! Ta+ Refo") Co))ission to su)it fi"st "e*o"t in si+ )ont$s: Pa"t$asa"at$i S$o)e - T$e 1indu8 ;n8d8<8 Ret"ie%ed f"o) $tt*:###8t$e$indu8co)usinessEcono)'ta+-"efo")co))ission-to-su)it-fi"st-"e*o"t-in-si+-)ont$s-*a"t$asa"at$i-s$o)ea"tic(e,2,7,98ece
THE GOODS AND SERVICES TAX BILL, 2016
2
INDIRECT TAXATION PROJECT
C"itica( Ana('sis of t$e GST 6i(( R %C7==%89#T!78S ; TH% ? %
GST $as een concei%ed in India on i)*(e)entation of 3isca( Res*onsii(it' and 6udget @anage)ent Act= 20 ;5e(4a" Co))ittee< ' t$e Tas4 3o"ce du"ing t$e ana('Ming of t$e e+isting ta+ s'ste)s at ot$= t$e Cent"a( as #e(( as t$e State (e%e(8! 5e(4a" Co))ittee ca)e u* #it$ t$e ose"%ation t$at int"oducing t$e nation#ide ta+ "efo") of dua( GST= as *e" #$ic$ a(( goods and se"%ices *"esent in t$e econo)' #ou(d e ta+ed= )ig$t e of $e(* in ac$ie%ing a co))on )a"4et= #it$ a #ide ta+ ase= and in i)*"o%ing t$e do)estic indi"ect ta+es "e%enue *"oducti%it' and a(so in en$ancing t$e #e(fa"e ' #a' of efficient "esou"ce a((ocation8 An E)*o#e"ed Co))ittee!2 #$ic$ co)*"ised of State 3inance @iniste"s #as constituted ' t$e Go%e"n)ent on t$e asis of t$e 5e(4a" Co))ittees "eco))endations fo" t$e *"e*a"ation of Design and Road @a* so as to i)*(e)ent GST8 T$e"e a"e )u(ti*(e ta+a(e e%ents due to )u(ti*(e (e%ies ot$ at Cent"a( as #e(( as State (e%e( unde" t$e *"e%ai(ing ta+ st"uctu"e8 T$e ta+a(e e%ent occu""ing in diffe"ent (a#s is: in case of Cent"a( E+cise (a#s= on )anufactu"ing of goods= fo" State AT (a#s on sa(e of goods= and fo" Se"%ice ta+ (a#s on su**('*"o%ision of se"%ices8 On t$e ot$e" $and in case of State (e%ies ta+a(e e%ent (i4e Ent"' Ta+ is on t$e ent"' of goods into a *a"ticu(a" >u"isdiction8 T$us unde" t$e *"e%ai(ing ta+ st"uctu"e t$e ta+a(e e%ent de*ends on t$e (e%'ing and $as een defined inde*endent(' #it$out )a4ing an' $a")onious "efe"ence to an' ot$e" ta+ (egis(ations8 GST #as *"o*osed to e a**(ied on sa)e ta+a(e e%ent on a(( su**(ies of goods and se"%ices= ' t$e ot$ Cent"a( as #e(( as t$e state go%e"n)ents8!0
! 5e(4a"=i>a' ;29<8 GST Reduces @anufactu"ing Cost and Inc"eases E)*(o')ent= Ti)es of India8 !2 E)*o#e"ed Co))ittee of 3inance @iniste"s= 20 !0 Nitin 5u)a" ;2!<= FGoods and Se"%ice Ta+ in India-A .a' 3o"#a"d= FG(oa( Jou"na( of @u(tidisci*(ina"' Studies= o( 0= Issue/= @a' 2!
THE GOODS AND SERVICES TAX BILL, 2016
27
INDIRECT TAXATION PROJECT C 7=$
T$e go%e"n)ents atte)*t to i)*(e)ent t$e GST i(( #as no(e as its ai) #as to "educe t$e co)*(e+it' in Indias e+istent ta+ "egi)e8 T$e *assage of t$e i(( $as (ed to ao(is$)ent of unnecessa"' co)*(ications ' c"eating a #e((-defined and unifo") ta+ "egi)e8 T$e GST #i(( $a%e )an' (asting i)*acts8 It #i(( c"eate a uo'ant sou"ce of "e%enue and *(ace t$e fisca( *osition on a *e")anent(' so(id footing8 It #i(( $e(* ta+ ad)inist"ation and "educe co""u*tion in indi"ect ta+ co((ection8 And it #i(( se"%e to )a4e India )o"e of a co))on )a"4et8 T$e e(i)ination of t$e inte"na( a""ie"s to t"ade s$ou(d e seen as a *ositi%e t"ade and *"oducti%it' s$oc4 fo" t$e Indian econo)'8 And (ess "ecogniMed is t$e fact t$at t$e GST #i(( a(so e a "edist"iuti%e e+e"cise= t"ansfe""ing "esou"ces to t$e *oo"e" states8!! GST 6i(( *"o)ised a "eduction of )u(ti*(e ta+es as one of its )ain enefits8 6ut t$is $as (ed to c"eation of anot$e" *"o(e)8 Due to t$is no# *o#e" $as een confe""ed on ot$ t$e Pa"(ia)ent as #e(( as on e%e"' state (egis(atu"e ' A"tic(e 2!/A!, fo" (e%'ing of goods and se"%ices ta+8 T$is is (eading to a situation #$e"e t$e"e is one *a"(ia)enta"' (a# and 27 states $a%ing *o#e" to (e%' ta+es8 A(so no constitutiona( "eui"e)ent is t$e"e to e unifo") fo" t$e state (a#s8 GST Counci( $a%e *o#e" to on(' "eco))end a )ode( (a# and t$e"efo"e states a"e not *"e%ented f"o) )a4ing and fo((o#ing t$ei" o#n (a#s8 1a%ing so )an' (e%ies ' Pa"(ia)ent and t$e states )ig$t (ead to disast"ous conseuences if t$e' #i(( not e in $a")on'8 A sea)(ess s'ste) of ta+ation is t$e asic featu"e of an' GST= in #$ic$ a(( duties= #$et$e" goods o" se"%ices= a"e set off against t$e duties *a'a(e on t$e fina( *"oduct8 @ost of t$e count"ies a"e $a%ing sing(e GST= on(' fe# $a%e a dua( GST8 T$e i)*(e)entation of t$e Indian %e"sion )ig$t tu"n out to e t$e )ost co)*(e+!/= as diffe"ent states a"e $a%ing *o#e"s to enact t$ei" o#n (a#s= t$e"e' int"oducing conce*ts of t$at of i)*o"ting and e+*o"ting8 !! ####8t$e$indu8co)ussinessindust"'ten-t$ings-to-4no#-aoutgsti((a"tic(e0/,8ece !, A"tic(e 2!/A= Indian Constitution 9,8 !/ Gi"is$ Ga"g= ;2!<=F6asic Conce*ts and 3eatu"es of Good and Se"%ice Ta+ in India
THE GOODS AND SERVICES TAX BILL, 2016
29
INDIRECT TAXATION PROJECT
E+c(uding of t$e *et"o(eu) *"oducts= e(ect"icit' and "ea( estate )ig$t (ead to a g"otesue= )ang(ed and )uti(ated %e"sion of Indian GST8 3u"t$e" its i)*act on t$e se"%ice secto" )ig$t tu"n out to e cost(' and inf(ationa"'= t$oug$ its i)*act on t$e )anufactu"ing secto" is e+*ected to e cost sa%ing ecause of a (eane" su**(' c$ain and t$e e(i)inating of t$e cascading ta+es8 T$oug$ )an' count"ies a"e $a%ing GST= ut it )ig$t tu"n out to e unsuita(e fo" %ast and $ete"ogeneous count"' (i4e India8 In Indian fede"a(is)= t$e &nion and States a"e $a%ing *o#e"s to (e%' diffe"ent 4inds of ta+es suiting t$ei" "eui"e)ents= is an essentia( featu"e8 T$is is ecause diffe"ent states $a%e diffe"ent needs= (i4e t$e "eui"e)ents of states (i4e @a$a"as$t"a and Gu>a"at )ig$t e co)*(ete(' diffe"ent f"o) t$at of J$a"4$and and Assa)8 6ecause of t$is= GST )ig$t (ead to se"ious difficu(ties= and )ig$t tu"n out to e a fai(u"e as it is t"eating uneua( states eua(('8 It is *"actica((' i)*ossi(e fo" t$e Cent"e to co)*ensate states #$ic$ )ig$t e (osing ta+ "e%enue fo" t$e ne+t fe# 'ea"s8 3u"t$e" GST is a )e"ge" of Cent"a( and State (e%ies eing ad)iniste"ed ' Cent"a( and State go%e"n)enta( officia(s8 T$is (eads to *(et$o"a of uestions as to $o# )an' assesses #i(( e t$e"e state #ise= o" #$o #i(( "es*onsi(e fo" ad)iniste"ing co)ined GST= #i(( eac$ state #i(( insist on $a%ing t$e *o#e" to ad)iniste" GST as *e" its te""ito"'8 3u"t$e" if t$is #i(( e t$e case= t$en no "o(e #i(( e (eft fo" t$e Cent"a( e+cise o" t$e Se"%ice ta+ de*a"t)ents= e+ce*ting t$e inte"-state t"ansactions8 A(so #$ic$ #i(( e t$e a**e((ate aut$o"ities and #i(( t$e"e e a sing(e o" )u(ti*(e t"iuna(s= a"e ot$e" of t$e fe# uestion a"ising8 A(so t$e GST #i(( (ead to situation )a4ing i)*o"ts )o"e co)*etiti%e8 T$is co)*(e+ st"uctu"e of "egu(ato"' ta+ (a#s and #ides*"ead co""u*tion at e%e"' stage )a4es t$e )anufactu"ing acti%it' in India (ess a**ea(ing8 If GST on i)*o"ts is a%ai(a(e as a c"edit to a t"ade"= as against t$e e+isting s'ste)= #$ic$ does not a((o# counte"%ai(ing dut' and s*ecia( additiona( dut' c"edits= i)*o"ted goods #i(( get a co)*etiti%e ad%antage se"ious(' saotaging t$e @a4e in India initiati%e8 It is est t$at t$e ta+ing *o#e"s of t$e state a"e not cu"ed8
THE GOODS AND SERVICES TAX BILL, 2016
0
INDIRECT TAXATION PROJECT
Suggestions Reco))ended fo" t$e 6i(( Des*ite t$e c$ange in ta+ (a#s and "egu(ation= t$e go%e"n)ent $as to co((ect t$e sa)e a)ount of "e%enue t$at #as ea"(ie" gene"ated8 In t$e GST "egi)e= t$e st"uctu"e of ta+ation is eing affected and cannot gene"ate t$e si)i(a" a)ount of "e%enue if co)*a"ed #it$ t$e *"e%ious )ode( of ta+ation due to ta+ c"edit )ec$anis)= "e)o%a( of cascading effect o" ot$e"#ise8 An ad>ust)ent in t$e ta+ "ate #$ic$ a%oid t$e diffe"ence o" (oss in t$e "e%enue co((ection is ca((ed Re%enue Neut"a( "ate ;RNR<8 T$e Nationa( Institute of *u(ic 3inance and Po(ic' "eco))ends t$at GST "ate #i(( e sa)e as t$e co)ined cent"a( and state ta+es on Goods at *"esent ut it s$ou(d e (o#e" t$an t$e co)ined cent"a( and state ta+es on se"%ices8! T$e *"o*osed "ate ' t$e e+*e"ts a"e said to e 089 fo" t$e state GST co)*onent and 28 on t$e cent"a( GST co)*onent8 9 !SCH#R*% 7 %<%CTR!C!T; R7= TH% *ST !<< )!<< #=78T T7 !8CR%#S% !8 TH% C7ST 7 $7)%R !8 TH% C78S=%R %89 (
In t$e *"esent scena"io t$e in*uts #$ic$ $e(* t$e indust"ies to gene"ate *o#e" a"e ta+ed ut t$e co)*anies a"e se(f-ena(ed in neut"a(ising t$e in*ut ta+es against (iai(ities on out*uts ot$e" t$an *o#e"8 1o#e%e" e(ect"icit' and *o#e" a"e su>ected to t$e ta+ duties (e%ied ' t$e "es*ecti%e state go%e"n)ent and a"e *aid ' t$e consu)e"8 On eing disc$a"ged f"o) t$e GST i((= t$e cost of *o#e" #i(( inc"ease f"o) /-7 fo" t$e consu)e"s as t$e indust"ies #i(( continue to *a' ta+es on t$e in*uts ut #i(( not gene"ate an' c"edit on t$e out*ut8 .it$ "efe"ence to t$e "ene#a(e ene"g' secto"= t$e in*ut of t$e )ac$ine"' and eui*)ent #i(( e ta+ed and t$e co)*anies #i(( suffe" (osses due to $ig$ in*ut costs and can (ead t$e econo)' to#a"ds inf(ation8 T$e so(ution o" t$e consent is t$e inc(usion of t$e *o#e" secto" in GST i(( and "inging a co)*ensation *o(ic' on t$e ta+es i)*osed on in*ut #it$ Me"o "ated out*ut8 S T#RT -$S T7 % T!
.it$ t$e c$ange in t$e ne# *o(icies #it$ "es*ect to t$e ta+ation= t$e go%e"n)ent needs to t"ain and t"ans)it t$e GST *o(icies and as*ects8 To $e(* t$e ne# t"ade to ada*t and f(ou"is$ in
! Re*o"t of t$e !t$ 3inance Co))ission= C$a*te" 0= FGoods and Se"%ices Ta+= 3e"ua"' 2!= 2,8
THE GOODS AND SERVICES TAX BILL, 2016
0
INDIRECT TAXATION PROJECT
t$e ne# "egi)e t$e go%e"n)ent $as to (in4 u* #it$ sta"t-u*s to connect t$e s)a(( and )ediu) siMe ente"*"ises #it$ t$e GST and t$e Goods and Se"%ice net#o"48 FGo%e"n)ent s$ou(d ai) to $e(* sta"t-u*s in connecting t$ei" A**(ication P"og"a))ing Inte"faces ;API< to t$e GST s'ste)8 APIs a"e not$ing ut too(s and *"otoco(s used fo" c"eating soft#a"e a**(ications8 3u"t$e"= it s$ou(d e)*$asiMe u*on t$e need of ui(ding ecos'ste) a"ound t$ese APIs8 It s$ou(d a(so educate t$e) aout t$e 4ind of data t$at #i(( e )ade a%ai(a(e to t$e) *ost-GST i)*(e)entation and $o# to )anage t$e sca(e of it8!7 H ;$7TH%T!C#< %#RS 7 $H#R=#C%T!C#< S%CT7RS
Afte" ana('sing a "ecent "e*o"t of GST= t$e *$a")aceutica( indust"ies a"e e+*ecting an a%e"age of 7 *e"cent )o"e ta+es on da' to da' )edicines8 T$e su**(' c$ain inc(udes t$e *$a")aceutica( ing"edient su**(ie"= t$e de%e(o*e" of ing"edient= and )anufactu"e #it$ #$o(esa(e" and "etai(e" as #e((8 T$e s*ecu(ation is t$at t$e )edicine *"ices #i(( "ise aout ! in t$e GST "egi)e8 T$e #o"4 s$ou(d e done ' t$e *$a")aceutica( indust"' to see4 *a"it' fo" t$e consu)e" end *"ice fo" t$e )edicines8 Re*"esentation in t$e fo") of est case studies can e )ade to t$e conce"ned aut$o"ities ' t$e *$a")aceutica( indust"' to attain t$e "eui"ed concessions and ue(( s*ecu(ati%e fea"s8!9 $ R%SSR% 78 TH% #8?!8* S%CT7R
T$e an4ing secto" is a(so *"essu"ised #it$ t$e sta"t of t$e GST "egi)e due to t$e destination ased )ode( of functioning8 Boans g"anted ' t$e "anc$ in a )et"o cit' )a' e uti(ised ' an' indust"' in t$e )a"4et fo" e+*ansion of #o"4 in anot$e" to#n ac"oss t$e count"'8 6an4s $a%e to )aintain t$e state #ise accounts to ensu"e its co)*(iance #it$ t$e ne# GST *"o%isions8 6an4s $a%e to e s#itc$ed on to t$e GST "egi)e faste" as t$e' a"e ta+ation no") ased institution8
!7 To#a"ds GST Regi)e In India= S$"uti Ga"g= Inte"nationa( Jou"na( of Scientific Resea"c$ and @anage)ent= 2,8 !9 GST in India: A 6ig Bea* in t$e Indi"ect Ta+ation S'ste)= R8 asant$ago*a(= Inte"nationa( Jou"na( of T"ade= Econo)ics and 3inance 2
THE GOODS AND SERVICES TAX BILL, 2016
02
INDIRECT TAXATION PROJECT ! 8C7R$7R#T!78 7 S=#<< TR#9%RS !8 TH% *ST !<<
T$e ne# GST s'ste) $as not offe"ed t$e t"ade"s t$e )ini)u) c(a"it' on stoc4 )anage)ent fo" t$e "e)aining goods and "ates8 T$e i)*o"tant uestion is= #$et$e" t$e t"ade"s #i(( e a%ai(ed #it$ in*ut c"edits o" t$e "e)aining stoc4 #i(( get cost(ie" and #i(( e an e+t"a financia( e+*ense to t$e)8 T$e"e $as to e *"o%isions fo" t$e ta+ *a')ent t$at #i(( e *aid ' t$e )anufactu"e eac$ ti)e goods a"e eing t"ansfe""ed8 &nde" GST *"o%isions a t"ade" )ust easi(' get in*ut c"edit= as unde" GST *"o%isions in t$e c$ain of t"ading if one t"ade" fai(s to fi(e inco""ect "etu"ns in GST t$en t$e enti"e c$ain of t"ade"s #i(( fai( to "ecei%e t$e enefit of in*ut c"edit8, C 78C%R8S 7%R =#8#CTR!8* 7 S7<#R $7)%R %Q!$=%8T
T$e funda)enta( *"o(e) is t$e inc"ease n t$e u"den of *"ices on t$e consu)e" end afte" t$e i)*(e)entation of GST8 T$is secto" $as een en>o'ing t$e Me"o ta+ *"o%ision in )ost of t$e states of t$e count"' ' t$e getting "ei)u"se)ent f"o) t$e go%e"n)ent8 T$e go%e"n)ent $as to )a4e su"e t$e Indian )anufactu"e"s s$ou(d not fa(( into a disad%antageous *osition #it$ "es*ect to fo"eign contende"s= #$ic$ #i(( e%entua((' "aise t$e cost of t$e *"o>ect and "esu(t in u"dening t$e consu)e"s8 @indset of t$e *"i%ate an4s $as to e c$anged to#a"ds t$e so(a" *o#e" *"o>ect and financia( asset (ending *o(icies to#a"ds t$e secto"8 % >C<S!78 7 97=%ST!C $R79CTS R7= TH% *ST
T$e g"oss do)estic *"oduct (i4e a(co$o( and toacco $a%e een disc$a"ged f"o) t$e GST "egi)e and $is $as (ed to *"ice disto"tions8 Pet"o(eu) *"oducts= e(ect"icit' dut'= a(co$o( fo" $u)an consu)*tion and sta)* dut' on i))o%ea(e *"o*e"t' )a4e ,o *e"cent of t$e GDP #$ic$ $as een 4e*t out of GST8 Go%e"n)ent $as to 4ee* a t$i"d of t$e *o#e" and s$a"e t$e t#o t$i"d #it$ t$e states #$o a"e i)*(e)enting GST #it$ st"ong )onito"ing ce(( #it$ fie(d office"s8
, P"e*a"ing t$e #a' fo" a )ode"n GST in India= Si>"en Cnossen= Inte"nationa( Ta+ and Pu(ic 3inance 20
THE GOODS AND SERVICES TAX BILL, 2016
00
