Discussion Paper on GST The Bikini Effect!

NOVEMBER 12 2!!"
B# Santosh $at%ar
T$E &uch'a%aite( (iscussion paper on GST fro& the E&po%ere( )o&&ittee of State
*inance Ministers re+ease( +ast Tues(a# %ith &uch fanfare %hich %as suppose( to ,i-e
a sneak peek into the %or+( of GST a &a.or turnin, point in the fie+( of in(irect ta/
refor&s in 0n(ia %as a co&p+ete +et(o%n1
0t ha( a++ the e/cite&ent of a &uch'a%aite( $in(i &o-ie %ith stea&# scenes fro& the
+ea( actors 2ut %hat %as put on (isp+a# is -er# (isappointin, as it hi(es &ore than it %as
actua++# suppose( to re-ea+1 $o%e-er %hat it has re-ea+e( pro-i(es enou,h fo((er for
specu+ation an( (iscussion on %hat is in store for the future of in(irect ta/es in 0n(ia an(
ho% co&p+e/ +ife %ou+( 2e for the stakeho+(ers after the actua+ intro(uction of GST1
Gi-en the a&ount of paper %ork in-o+-e( to a&en( the re+e-ant pro-isions of the
)onstitution an( the appropriate +e,is+ations re3uire( to 2e put in p+ace 2# the Par+ia&ent
an( the State 4e,is+atures an( a+so the enor&it# of the tasks cut out for 2ureaucrac# to
re-a&p the a(&inistrati-e &echanis& for an effecti-e pan'0n(ia ro++ out it is -er#
(ou2tfu+ if a++ this cou+( 2e achie-e( 2efore 5pri+ 1 2!1! ,i-en the fact that it took
se-era+ #ears an( a p+ethora of %orkin, ,roups to sort out -arious issues an( u+ti&ate+#
co&e out %ith this Discussion Paper1
0n &# -ie% if the Par+ia&ent an( the State 4e,is+atures (o not &eet the 5pri+ 1 2!1!
(ea(+ine then %e can e/pect it to 2e intro(uce( fro& 5pri+ 1 2!11 a+on, %ith the &uch
a%aite( Direct Ta/es )o(e sche(u+e( to 2eco&e +a% fro& 5pri+ 1 2!111 But %e can rest
assure( that GST is ,oin, to 2e a rea+it# an( it (oes not &atter if it is 2!1! or 2!111
0n this 2rief %rite up an atte&pt is &a(e to hi,h+i,ht the sa+ient features of the propose(
GST as re-ea+e( 2# the Discussion Paper an( so&e of the co&p+e/ities it has to ne,otiate
2efore it 2eco&es a rea+it#1
Dua+ GST6
77 Dua+ GST to 2e +e-ie( 2# 2oth )entre an( the States on ,oo(s an( ser-ices %hich
%i++ 2e 2acke( 2# re+e-ant a&en(&ents to the )onstitution for the purpose of ena2+in,
the States to +e-# GST on ser-ices an( a+so a++o% )entre to ta/ the -a+ue a((ition (o%n
the (istri2ution chain1
One %on(ers as to ho% )entre %i++ 2e a2+e to ta/ this -a+ue a((ition %hen States %i++
a+so +e-# GST on this (istri2ution chain1 *or e1,1 %hen ,oo(s e&er,e fro& a
&anufacturin, entit# it is su2.ect to +e-# of 2oth )ENV5T an( V5T or )ST as the case
&a# 2e %hen it is so+( to the consu&er %ho is a %ho+esa+er or another &anufacturer %ho
further consu&es these ,oo(s an( ser-ices1
8hen the ,oo(s &o-e throu,h the (istri2ution chain to reach the u+ti&ate consu&er i1e1
throu,h the (istri2utor to the retai+ers an( u+ti&ate+# to the consu&er there is -a+ue
a((ition %hich is a+rea(# su2.ect to +e-# of V5T at -arious +e-e+s in this (istri2ution
chain apart fro& other +e-ies +ike entr# ta/ octroi surchar,e cess etc an( %hich %i++ 2e
su2su&e( 2# the propose( +e-# of GST 2# the States1
Then ho% can this -a+ue a((ition in the (istri2ution chain 2e inc+u(e( in the (o&ain of
)entre1 8i++ it not a&ount to (ou2+e ta/ation on the sa&e set of transaction 2# 2oth
)entre an( the States9 Ma# 2e the actua+ +e,is+ations an( the propose( a&en(&ents to the
)onstitution %i++ take care of these issues an( 2rin, &ore c+arit#1
Su2su&in, of )entra+ an( State ta/es6
77 Su2su&in, of )entra+ ta/es +ike e/cise (ut# :this %as a+rea(# rena&e( as ;)ENV5T<
in the #ear 2!!!= a((itiona+ (uties of e/cise e/cise (ut# +e-ie( un(er the M > TP 5ct
ser-ice ta/ a((itiona+ custo&s (ut# +e-ie( un(er section ?:1= of )usto&s Tariff 5ct
1"@A i1e1 )VD in co&&on par+ance a((itiona+ custo&s (ut# +e-ie( un(er section ?:A= of
)usto&s Tariff 5ct 1"@A i1e1 S5D in co&&on par+ance cesses an( surchar,es in the
GST to 2e +e-ie( 2# the )entre %hich %i++ 2e ca++e( as )entra+ Goo(s an( Ser-ices Ta/
or )GST for short1
77 Su2su&in, of State'+e-e+ ta/es +ike V5TBSa+es ta/ entertain&ent ta/ :other than those
+e-ie( 2# +oca+ 2o(ies %h# shou+( this 2e +eft out= +u/ur# ta/ ta/es on +otter# 2ettin,
an( ,a&2+in, cesses an( surchar,es +e-ie( 2# states in so far as the# re+ate to supp+# of
,oo(s an( ser-ices in the GST to 2e +e-ie( 2# the States %hich %i++ 2e ca++e( as State
Goo(s an( Ser-ices Ta/ or SGST for short1 )ST %i++ 2e co&p+ete+# phase( out %hich is
on e/pecte( +ines1
Both )GST an( SGST %i++ 2e a-ai+a2+e for set off at the su2se3uent +e-e+ of transaction1
Set off6
77 The set off of )GST an( SGST are &utua++# e/c+usi-e1 The input cre(it accu&u+ate(
fro& )GST sha++ not 2e uti+iCe( for (ischar,in, SGST an( -ice -ersa1 $o%e-er there is
a ne% &echanis& propose( to 2e put in p+ace for inter'state transactions in ,oo(s an(
ser-ices %ith the intro(uction of the concept of 0GST %here )entre %i++ +e-# 0GST on the
inter'state transaction of ,oo(s an( ser-ices1 0GST %i++ ha-e co&ponents of 2oth )GST
an( SGST coup+e( %ith appropriate pro-isions for consi,n&ent or stock transfer of
,oo(s an( ser-ices :0 %on(er ho% the# %i++ stock transfer intan,i2+es +ike ser-ices=1
The propose( cre(it &echanis& in case of 0GST %i++ %ork as fo++o%s6
The inter'state se++er %i++ pa# 0GST on -a+ue a((ition after a(.ustin, a-ai+a2+e cre(it of
0GST )GST an( SGST on the purchases1 The e/portin, state i1e1 the state in %hich the
inter'state se++er is +ocate( %i++ transfer to the )entre the cre(it of SGST use( in pa#&ent
of 0GST1 The (ea+er in the i&portin, state i1e1 the 2u#er in the inter'state transaction %i++
c+ai& cre(it of 0GST for (ischar,in, his output ta/ +ia2i+it# in that state i1e1 )GST SGST
an( 0GST %hich he &a# 2e +ia2+e to pa# further1 The )entre %i++ transfer to the
i&portin, state the cre(it of 0GST use( in pa#&ent of SGST1 0n fact )entre %i++ act as a
c+earin, house for this purpose for a++ the i&portin, states1
GST on i&port of ,oo(s an( ser-ices6
77 4e-# of GST 2# 2oth )entre an( States on i&port of ,oo(s an( ser-ices into 0n(ia
an( a++o%in, this +e-# as set off1 The inci(ence of this +e-# %i++ fo++o% the (estination
princip+e an( the ta/ re-enue in case of SGST %i++ accrue to the State %here the i&porte(
,oo(s an( ser-ices are consu&e(1 This +e-# %i++ a+so 2e 2acke( 2# necessar#
)onstitutiona+ a&en(&ents to ena2+e the States to actua++# +e-# GST on i&port of ,oo(s
an( ser-ices1
8hi+e the E&po%ere( )o&&ittee has i(entifie( the ta/es an( +e-ies at 2oth the )entra+
an( State +e-e+ %hich shou+( 2e su2su&e( into the ne% +e-ies the i(ea of i&posin, 2oth
)GST an( SGST on i&port of ,oo(s an( ser-ices 2# 2oth )entre an( States is intri,uin,
since there is no proposa+ to (is2an( the 2asic custo&s (ut# +e-ie( un(er section 12 of the
)usto&s 5ct 1"D21
Moreo-er there is no proposa+ to su2su&e 2asic custo&s (ut# as %e++1 On+# )VD an(
S5D are consi(ere( for this purpose1 0f the i(ea is to (o a%a# %ith +e-# of 2asic custo&s
(ut# a+to,ether an( in turn i&pose )GST an( SGST separate+# on i&ports then it is
%e+co&e 2ecause it 2eco&es e+i,i2+e for set off for the su2se3uent entit# in the -a+ue a((
chain1 But i&posin, 2asic custo&s (ut# an( a+so )GSTBSGST on i&ports of ,oo(s is not
a -er# ,oo( i(ea as it %i++ 2ur(en the consu&ers :irrespecti-e of %hether he is an
in(i-i(ua+ or a &anufacturin, entit#= -er# 2a(+#1
5+ternati-e+# 2asic custo&s (ut# &a# 2e rep+ace( a+to,ether %ith +e-# of )GST an(
SGST 2# 2oth )entre an( States since 2asic custo&s (ut# is not a-ai+a2+e for set off
thou,h it is an in(irect +e-# u+ti&ate+# passe( onto the consu&er %hereas )GST an(
SGST +e-ie( on i&ports %i++ 2e a-ai+a2+e for set off1
GST Structure6
77 8hi+e the E&po%ere( )o&&ittee (eci(e( to a(opt a t%o rate structure a +o%er rate
for necessar# ite&s an( ,oo(s of 2asic i&portance an( a stan(ar( rate for ,oo(s in
,enera+ an( specia+ rate for precious &eta+s there is no c+ue as to %hat the rates %ou+( 2e
an( %hether this structure %ou+( 2e unifor&+# a(opte( in )GST as %e++ as SGST1
There is a proposa+ to a(opt the e/e&pte( ,oo(s +ist in the V5T (o&ain inc+u(in, ,oo(s
of +oca+ i&portance on an a++ 0n(ia 2asis inc+u(in, the )entra+ Go-ern&ent1 This is #et to
2e reso+-e( an( fina+iCe( an( ,i-en the (i-ersit# in pro(uction of ,oo(s an( ser-ices in
this countr# it is to 2e seen if there %i++ 2e an# consensus on this issue1 But +et us hope
that there %i++ 2e a consensus an( a unifor& +ist is a(opte( for 2oth )GST an( SGST
%hi+e keepin, the +ist to the 2arest &ini&u&1
Thresho+( +i&it an( co&poun(in, sche&e6
77 The E&po%ere( )o&&ittee propose( a thresho+( of Rs11! +akh 2oth for ,oo(s an(
ser-ices for SGST for a++ the states an( union territories %ith a(e3uate co&pensation for
certain states :particu+ar+# North'Eastern re,ion an( specia+ cate,or# states= %here a
+o%er thresho+( ha( pre-ai+e( in the V5T re,i&e1
*urther to 2enefit s&a++ tra(ers an( s&a++ sca+e in(ustries an( to a-oi( (ua+ contro+ the
thresho+( for )GST for ,oo(s is propose( to 2e at Rs111A crore %hi+e reco&&en(in, a
hi,her thresho+( for ser-ices un(er )GST1 0f the thresho+( for ser-ices un(er SGST is
propose( to 2e Rs1 1! +akhs then for the sake of unifor&it# a si&i+ar thresho+( +i&it
&akes sense e-en for )GST1 There is no reason %h# there shou+( 2e a hi,her thresho+(
for ser-ices un(er )GST1
77 0n a((ition to the propose( thresho+( +i&its the E&po%ere( )o&&ittee i&porte( the
concept of co&poun(in, sche&e pre-ai+in, in the V5T (o&ain into GST1 $o%e-er
stran,e+# its reco&&en(ation is on+# in the rea+& of SGST an( not )GST1 The
co&positionBco&poun(in, sche&e for the purpose of GST %ou+( ha-e a unifor& upper
cei+in, on ,ross annua+ turno-er :Rs1 A! +akhs= an( a f+oor ta/ rate :!1AE= %ith respect to
,ross annua+ turno-er across the states1
The sche&e %ou+( a+so a++o% option for GST re,istration for (ea+ers %ith turno-er 2e+o%
the co&poun(in, cut'off1 $o%e-er it is not re-ea+e( if this ta/ pai( 2# the entities
a-ai+in, co&position sche&e is e+i,i2+e as set off for the 2u#ers1
Stran,e+# there is no proposa+ fro& the E&po%ere( )o&&ittee for a(option of a si&i+ar
&echanis& un(er )GST for the sake of unifor&it#1 0t &a# 2e note( that there is a+rea(# a
co&poun(in, sche&e pre-ai+in, in ser-ice ta/ %hich is current+# +i&ite( to %orks
contract ser-ice1 5+so there are se-era+ a2ate&ent sche&es for -arious ta/a2+e ser-ices
%ith -arious per&utations an( co&2inations1
Pro2a2+# it %as presu&e( that since the thresho+( +i&it for ,oo(s un(er )GST is a+rea(#
set at a hi,h of Rs1 11A crores there is no re3uire&ent for a separate co&poun(in,
sche&e for ,oo(s un(er )GST1 0f that is so then +et there 2e a co&&on thresho+( +i&it of
sa# Rs1 A! +akhs for ,oo(s un(er 2oth )GST an( SGST an( (o a%a# %ith co&position
sche&e a+to,ether as it %i++ on+# co&p+icate proce(ura+ re3uire&ents for a-ai+in, set off1
Pro(ucts an( ta/es out of GST fo+(6
77 Since so&e states earn su2stantia+ re-enues fro& purchase ta/ especia++# states %hich
pro(uce foo( ,rains this issue is #et to 2e reso+-e(1
77 4oca+ +e-ies +ike octroi i&pose( 2# +oca+ 2o(ies on &o-e&ent of ,oo(s an( ser-ices
are not in the +ist of ta/es %hich %i++ 2e su2su&e( 2# GST an( %i++ continue to e/ist e-en
after intro(uction of GST1
77 5+coho+ic 2e-era,es petro+eu& pro(ucts to2acco pro(ucts :partia++#= %i++ continue to
2e out of GST1
77 5rea 2ase( e/e&ptions are in .eopar(# as the E&po%ere( )o&&ittee proposes to
(iscontinue these e/e&ptions a2ate&ents re2ates etc1 Fnfortunate+# the specia+
in(ustria+ area sche&es operatin, in the V5T (o&ain is co&p+ete+# (ifferent fro& the area
2ase( e/e&ptions pro-i(e( 2# the )entra+ Go-ern&ent1
0t %i++ 2e interestin, to see ho% this pans out %hen the actua+ +e,is+ations are put in p+ace
2ecause the states %hich ha-e 2enefite( fro& this )entra+ sche&e %i++ ha-e to (o a ti,ht
rope %a+k to actua++# persua(e the )entre to e/ten( this e/e&ption 2enefit1
Thus %hi+e the efforts put in p+ace 2# -arious %orkin, ,roups 2urnin, &i(ni,ht oi+ to
2rin, a2out +ife a+terin, chan,es in the fie+( of in(irect ta/ation in 0n(ia is +au(a2+e the
re-e+ations throu,h the Discussion Paper is certain+# (isappointin, as it ,i-es scope for
&ore 3uestions than ans%ers1 5fter #ears of pain stakin, e/ercise an( har( +a2our 2# the
E&po%ere( )o&&ittee an( its -arious %orkin, ,roups the +east %e can e/pect is that
the chi+( %i++ not 2e a sti++ 2orn1
First Discussion Paper on Goods and Services Tax Looking forward !!
NOV!"# $$% &''(
") *eetes+ Veera , Sures+ Nair
T* Empowered Committee of State Finance
Ministers has submitted its First Discussion Paper on
Goods and Services Tax (GST) and the same has
been paced in pubic domain for comments! This
document has ta"en into account the report of the
#oint $or"in% Group on GST and the views received
from the State and Centra Government on proposed
mode for GST ma"in% it the &curtain raiser' for the
eventua ro out of GST! (mon%st others) the
Discussion Paper has aid emphasis on the need to have an appropriate
mechanism on GST) bindin% on both the Centre and the States! The importance
of a harmonius rate structure under GST with a%reed upon mandate on
Constitutiona amendment aso finds mention in the Discussion paper!
*e+ features of proposed GST mode,
-o.ponents of GST/
( dua GST with defined functions for the Centre and States has been
recommended! -n other words) both the Centre and the States woud have
concurrent power to ev+ tax on %oods and services ie The dua GST woud have
two components, one evied b+ the Centre (CGST) and the other evied b+ the
States (SGST)! This is ine with the .ud%et announcement of /on0be Finance
Minister!
Taxes to 0e su0su.ed under GST/
Central levies to be subsumed under CGST
1 Centra Excise dut+
1 (dditiona Excise duties
1 The Excise dut+ evied under the Medicina and Toietries Preparation (ct
1 Service Tax
1 (dditiona customs dut+ ) common+ "nown as Countervaiin% Dut+ (C2D)
1 Specia (dditiona Dut+ of Customs3 45 (S(D )
1 Surchar%es) and
1 Cesses
State taxes to be subsumed under SGST
1 2(T 6 Saes tax
1 Entertainment tax evied b+ States ( Entertainment tax evied b+ oca bodies
has been eft out )
1 7uxur+ tax
1 Taxes on otter+) bettin% and %ambin%
1 State Cesses and Surchar%es which reate to supp+ of %oods and services
1 Entr+ tax not in ieu of 8ctroi
The treatment to be adopted for Purchase tax is under discussion and a fina
view on the same is +et to emer%e! -t is desirabe to have consensus on
subsumin% Purchase tax ) as "eepin% such components of present 2(T s+stem
out of GST coud impact the efficienc+ of the proposed GST mode! This is one of
the open issues identified in the Discussion Paper!
(cohoic bevera%es and Petroeum Products have been "ept out of the GST net
whereas Tobacco products woud be sub9ected to GST with -nput Tax Credit!
Centre ma+ be aowed to ev+ excise dut+ on tobacco products over and above
GST without -nput Tax Credit!
1pp2ica0i2it) of GST /
CGST and SGCT woud be appicabe to a transactions of %oods and services
made for a consideration with the foowin% exemptions,
Exempted %oods and services
Goods which are outside the purview of GST
Transactions which are beow the prescribed threshod imit for GST
GST rate structure
:nder the proposed GST mode) %oods woud have two rates) both at Centre and
State ; 7ower rate for necessar+ items and a standard rate for %oods in %enera!
( specia rate has been envisa%ed for precious metas with a ist of exempted
%oods under CGST and SGST (efforts are on to have a simiar exempted ist of
%oods)! Services woud have a sin%e rate at CGST and SGST eve! The
Discussion paper does not refer or comment on the <evenue =eutra <ate or
exact vaue of two rates for %oods6 services which woud be "nown in due
course! This woud have heped the sta"e hoders understand possibe impact of
proposed GST mode on their business and operations!
Statute for GST/
-t is now officia that mutipe statutes (one for CGST and a separate statute for
ever+ state) woud %overn the impementation of Dua GST! This is one area that
re>uires concerted effort from the Centre and the Empowered Committee as
mutipe state e%isations coud ma"e the proposed GST mode no different from
the present 2(T set up! Comprehendin% the issues that coud arise out of
mutipe state e%isations ( as experienced durin% the phased impementation of
2(T )) the discussion paper specifica+ mentions that the basic features of aw
such as char%eabiit+) definition of taxabe event and taxabe person) measure of
ev+) vauation provisions) basis of cassification etc woud be uniform across the
state statutes as far as practicabe !
1d.inistration of GST
The administration of CGST woud be vested with the Centre and that for SGST
woud be with the respective States! The Centre and the States woud have
concurrent 9urisdiction for the entire vaue chain and for a taxpa+ers on the
basis of prescribed threshod for %oods and services! Functions such as
assessment) scrutin+) audit and enforcement woud be underta"en b+ the
authorit+ coectin% the respective taxes!
T+res+o2d for GST
( uniform threshod for SGST of <s ?@ a"h both for %oods and services for a
States and :nion Territories has been adopted! There is a reference that CGST
for %oods ma+ be "ept at <s ?!A crore and the threshod for CGST for services
ma+ aso be &appropriate+ hi%h'!
-o.position 3 -o.pounding Sc+e.e under GST
( uniform compoundin% cut;off of <s A@ a"hs of the %ross annua turn over with
a foor rate of @!A5 across the states has been recommended! 8ption for deaers
to opt for GST even if beow the compoundin% cut;off woud be provided!
GST on i.ports and exports
-mports woud attract both CGST and SGST under the proposed GST mode!
Given the destination based concept of GST) it has been carified that the tax
revenue in case of SGST wi accrue to the State where the imported %oods and
services wi be consumed! Exports (from processin% Bones of the SEC0s ) E8:0s
or domestic tariff units ) woud be free from ev+ of GST! Cearances from SEC to
DT( woud attract GST without an+ benefits to appicabe rates!
-redit .ec+anis. under GST
The proposed mode does not offer fun%ibiit+ of CGST with SGST and vice a
versa ie Cross utiiBation of input tax credit between CGST and SGST woud not
be aowed under the proposed GST mode! Taxes paid a%ainst the CGST woud
be ta"en as input tax credit for pa+ment of CGST on+! The same principe woud
app+ for the SGST! This woud envisa%e maintainin% separate sets of records for
avaiin% and utiiBation of CGST and SGST!
1rea 0ased exe.ption sc+e.es 3 Specia2 4ndustria2 1rea Sc+e.e
Present tax exemption scheme woud ma"e wa+ for cash refund schemes after
coection of GST so as to maintain the chain of set;offs! The area based
exemption scheme woud be continued ti such time of e%itimate expir+ of the
Scheme! -t is proposed to do awa+ with an+ new exemption or continuation of
such specia industria area schemes under GST re%ime!
Proper accounting of t+e GST
The CGST and SGST woud be credited to the identified accounts of the Centre
and respective States separate+! The Discussion Paper ac"nowed%es that this
coud be an important co% in the whee for smooth transition and impementation
of GST and specifica+ mentions that it shoud be ensured that the account
heads for a services and %oods woud have indication whether it reates to
CGST and SGST (identif+in% the State to whom the specific SGST is to be
credited)!
Tax pa)er 4dentification Nu.0er
$ith view to inte%rate the P(= based -ncome tax number and faciitate data
exchan%e and tax pa+er compiance) each tax pa+er woud be aotted a P(=
based taxpa+er identification number with a tota of ?D6?A di%its!
Periodica2 returns
<eturns as prescribed woud need to be submitted to bother the Centre GST
authorit+ and to the State GST authorities concerned!
4nter State transactions of Goods and Services
The Discussion Paper supports the view that with the introduction of GST) ev+ of
Centra Saes tax (CST) on inter;state transactions woud be removed! 8ne
important feature comin% out from the Discussion Paper is carit+ on the manner
in which inter state transactions woud be taxed under GST! Saient features of
the -GST mode for taxin% -nter State transactions of %oods and services) as
accepted b+ the Empowered Committee) are as foows,
Centre woud ev+ -GST ( which woud t+pica+ be sum of CGST and SGST ) on
a inter;state transaction of taxabe %oods and services! The inter;state seer
wi pa+ -GST on vaue addition after ad9ustin% avaiabe credit of -GST) CGST and
SGST on his purchases! The -mportin% deaer wi caim credit of -GST which
woud be used b+ him for dischar%in% his output tax iabiit+ in his own state!
( Centra a%enc+ to be set up to act as a cearin% house) verif+ the caims and
inform the respective %overnments to transfer the funds!
The "e+ advanta%es of -GST Mode are,
:ninterrupted -TC chain on inter;state transactions
Substantia boc"a%e of funds for the inter;state seer or bu+er not envisa%ed
<efund mechanism not re>uired as deaer in exportin% state woud use up the
-nput tax credit for pa+in% the tax
"efore parting / The Discussion Paper has not thrown open an+ Pandoras box
or surprises and much of the "e+ impact areas coud depend on how the
e%isation is put in pace as a mechanism to administer this new ev+! The
Discussion Paper is in s+nc with the information 6 thou%ht process avaiabe in
pubic domain and deiberated upon aso Empowered Committee coud have
provided carit+ on the i"e+ effective date of impementation of GST) the
possibe rates for %oods 6 services) whether the M<P based vauation Scheme
woud continue in the proposed GST scenario) how the refund mechanism of
CGST and SGST which repaces area based exemption scheme woud wor" to
overcome the cash fow issues) what woud be the treatment for accumuated
Cenvat Credit 6 2(T credit whie transitionin% into the proposed GST mode etc!
Ma+ be there wi be more on these aspects in the da+s to come!
5T+e aut+ors are senior indirect tax professiona2s in rnst , 6oung Ltd7
T+e views expressed are persona28

-2ick to Print -2ick to -2ose
First GST Discussion Paper 9 1 Da.p S:ui0;
NOV!"# $$% &''(
") S Sivaku.ar% -1
T* much awaited First GST Discussion Paper is out and is ar%e+ on expected
ines! 8ne is however disappointed to see that the Paper does not contain an+
specific proposas) which woud have made it more reevant for the -ndustr+!
7et0s ta"e a >uic" oo" at some of the saient points covered in the Discussion
Paper!
?! The Paper does not %ive an+ indication about the GST rates) the most
important issue under the GST! The east it coud have attempted) is to specif+
the revenue neutra rate! -n a Eh+pothetica exampe0 %iven in the Paper) there is
a mention of ?@5 CGST and ?@5 SGST! - don0t "now if this is an indication of
the i"e+ hi%h tax rates under the GST re%ime! $e wi "eep our fin%ers crossed)
for the present!
F! The Paper ta"s of the Centra Excise) (dditiona Centra Excise) Service tax)
C2D) Specia (dditiona Customs Dut+ (S(D)) Surchar%es and Cesses to be
subsumed within the CGST) whie 2(T6Saes tax) Entertainment Tax) 7uxur+ Tax)
Taxes on otter+) bettin% and %ambin%) states cesses and surchar%es in so far as
the+ reate to supp+ of %oods and services and entr+ tax in ieu of octroi! -t now
oo"s certain that stamp dut+ woud be outside of GST and so woud octroi and
entr+ tax! This is bad news for the <eat+ Sector and for purchasers of fats) etc!
D! Para D!G of the Paper ma"es a bod statement that exports woud be Bero
rated and that) SECs mi%ht aso %et covered! The para aso ma"es it cear that
saes from an SEC to DT( woud not %et the benefit of Bero ratin%! -t now seems
cear that exporters woud need to caim refunds of the CGST and SGST from the
Centra and State Governments) respective+! The word of exemptions woud
seem the thin% of the past now) even for SECs! The ver+ ob9ective of Bero ratin%
of exports can be achieved on+ under an exemption re%ime and the Government
"nows it we! The record of refund of indirect taxes incurred on exports b+ the
Centra Government has been pathetic) to sa+ the east! Exporters woud now
have to "noc" the doors of the State Government) as we) for refund of the
SGST paid on inputs and input services!
4! Para D!H of the Paper ta"s of GST on imports! The Para states that b oth
CGST and SGST wi be evied on import of %oods and services into the countr+!
The incidence of tax wi foow the destination principe and the tax revenue in
case of SGST wi accrue to the State where the imported %oods and services are
consumed! Fu and compete set;off wi be avaiabe on the GST paid on import
on %oods and services! -ssues coud crop up in terms of compex transactions
invovin%) et0s sa+) a t+pica transaction invovin% import at the Chennai Port)
imported %oods passin% thro0 (ndhra Pradesh and reachin%) et0s sa+) .an%aore)
the destination! -t coud be hard to enthuse the %u+s in Tami =adu to faciitate
an import transaction) for which) *arnata"a woud %et the tax revenue! 8ne
hopes that a set off mechanism %ets introduced to %et over issues of this "ind!
A! -n terms of the threshod imits) the Papers indicates that the threshod for
CGST for %oods ma+ be "ept at <s ?!A crores (which is the current exemption
imit under centra excise)!There is no indication about the threshod imit for
services! -n terms of the composition6compoundin% scheme) the Paper ta"s of a
cut off imit of <s A@ a"hs and the foor rate of @!A5 across the states! This
coud be an issue with the wor"s contractors) who are current+ entited to %o
under the composition scheme under the state 2(T aws) irrespective of an+ cut
off imit! There is definite+ a need to oo" at a composition scheme for wor"s
contractors) on the ines of the existin% provisions in the 2(T and Service Tax
aw!
I! The Paper ta"s of credit in terms of the CGST and SGST under the respective
streams) without an+ cross utiiBation bein% aowed! 8ne %ood thin% is that) the
Paper aso ta"s of refund of accumuated credit arisin% on account of mismatch
in the tax rates wherein the input tax rate is hi%her than the output tax rate)
purchase of capita %oods) etc!) apart from) on account of) exports! <efund of
accumuated credit due to a mismatch is current+ aowed on+ in the state 2(T
aws and not under the centra excise and service tax aws! -f the GST is abe to
brin% about a scheme for refund of excess input credit even in respect of non;
exporters) we shoud hai this as a %reat step forward!
G! -t is disappointin% to see that the Paper ma"es no mention of how wor"s
contracts woud be treated under the GST! =either is an+ mention on how the
<eat+ Sector woud be treated! There have) of course) been reports that the
Government is contempatin% a e%isative provision for deemin% the first sae b+
a buider as a taxabe transaction under GST but this does not find a pace in the
Paper!
H! The Paper states that the -GST (E-nter State GST0) Mode woud be foowed
for inter;state transactions) under which) the Centre woud ev+ -GST which
woud be CGST pus SGST on a inter;State transactions of taxabe %oods and
services! The inter;State seer wi pa+ -GST on vaue addition after ad9ustin%
avaiabe credit of -GST) CGST) and SGST on his purchases! The Exportin% State
wi transfer to the Centre the credit of SGST used in pa+ment of -GST! The
-mportin% deaer wi caim credit of -GST whie dischar%in% his output tax
iabiit+ in his own State! The Centre wi transfer to the importin% State the
credit of -GST used in pa+ment of SGST! The reevant information is aso
submitted to the Centra (%enc+ which wi act as a cearin% house mechanism)
verif+ the caims and inform the respective %overnments to transfer the funds!
8n the fact of it) this seems to be an exceent wa+ to %o about) in respect of
inter;state transactions) thou%h one can foresee some issues croppin% up in
respect of compication transactions i"e sae of %oods in transit) to a deaer in a
third state) etc!
J! -t is disappointin% to see that the Paper ma"es no mention on how the carried
forward 6 unutiiBed credit) both under the centra aws as we as under the 2(T
aws woud %et treated under GST! -n the absence of an+ mention of the intent to
restrict the carried forward input tax credit) one hopes that the Government
woud aow for this unutiiBed credit to be carried forward under the GST re%ime
without an+ restrictions!
?@! -n terms of the endeavour to have common rues and procedures to be
foowed in respect of both the CGST and the SGST) the Paper ma"es a %eneric
statement that such uniform procedure woud be prescribed) to the extent
feasibe! The Paper does not even sa+ that there woud be common returns!
There is no %uarantee that we woud have a near common e%isation appicabe
to both CGST and the SGST! This coud be bad news for the -ndustr+ as one
shoud expect the ni%htmares of handin% the State <evenue Coection
machiner+ to continue under the GST re%ime!
??! (s expected) the GST ma"es a mention that acohoic bevera%es and
petroeum products wi be outside of GST) whie tobacco products woud come
under GST! -t has been express+ stated that the Centra Government coud ev+
centra excise dut+ on tobacco products) over and above the GST! -t is
heartenin% to "now that tobacco woud continue to be a mi"in% cow for the
Government) even under the GST! (s a non;smo"er) - have no compaints!
?F! The proposa to have a P(= in"ed taxpa+er identification number is a %ood
move in as much as) a sin%e number can perhaps be used for both direct and
indirect taxes) for the first time!
?D! The Paper has no provisions on the procedura aspects concerned with GST
incudin% on) assessments) movement of %oods) scrutin+) audits) etc! -t does
oo" i"e that the inter;state chec" posts coud continue under GST!
"efore conc2uding77777777
11 The cost of compiance under the GST woud %o up si%nificant+) %iven the
fact that the Paper ta"s of separate records to be "ept for the CGST and SGST
purposes! $ithout a rationaiBation in terms of returns) assessments) appeas)
etc! in respect of the CGST and the SGST) one shoud expect the compiance
costs to %o up si%nificant+) especia+ for services providers who are current+
outside the purview of the State Governments!
11 That there is no unanimit+ even in respect of the GST rates is perhaps) proof
of the fact) that a ot needs to be done) %oin% forward!
11 $ith time runnin% out for the D;Date) it woud be a /ercuean tas" for the
Government to meet the impementation date tar%et of (pri ?) F@?@) despite its
%ood intentions! -f the Government is serious on introducin% GST from (pri ?)
F@?@) it woud need to move much much faster!
11 8ne cannot but wonder as to wh+ the Government has not made use of the
opportunit+ and incuded specific proposas in the Discussion Paper) which coud
have set the ba roin% for the GST impementation from (pri ?) F@?@! -s the
First GST Discussion Paper then) a damp s>uibK
5T+e 1ut+or is Director% S< So2utions Pvt Ltd% "anga2ore8

-2ick to Print -2ick to -2ose
First Discussion Paper 0rings c2arit) on .an) issues!
NOV!"# $$% &''(
") Prita. !a+ure% -1
F4N1LL6% it0s out! The EFirst Discussion Paper on GST in -ndia 0 (herein after
referred as EPaper0 ) was reeased b+ the Empowered Committee) ed b+ (sim
Das%upta) on ?@!??!F@@J! The paper is a starter for the approachin% GST
re%ime! -t 9ust sets roin% the discussion on the comin% GST so the ministr+ can
receive views from the industr+ and customer!
The paper deivers carit+ on man+ aspects of proposed Goods and Service Tax
(GST)! -n the foowin% paras) - have made an attempt to summarise what the E
Paper 0 sa+s and what it doesn0t!
11 Dua2 structure/ (s expected) -ndia is impementin% E dua GST 0 ! Centre
Government woud be ev+in% Centra GST (CGST) and State Governments woud
be ev+in% State GST (SGST)! CGST and SGST woud be appicabe on a22 t+e
transactions of goods and services .ade for a consideration except,
11 Exempted %oods and services which are outside the purview of GST and
11 Transactions which are beow the prescribed threshod imits!
11 Statutes/ This dua GST mode woud be impemented throu%h .u2tip2e
statutes 5one for -GST and SGST statute for ever) State87 /owever) an
assurance is %iven in the paper that the basic features of aw such as
char%eabiit+) definition of taxabe event and taxabe person) measure of ev+
incudin% vauation provisions) basis of cassification etc! woud be uniform across
these statutes as far as practicabe!
11 Date of introduction of GST/ =o date for introduction of the GST is
proposed in the Paper! The deadine for its impementation i!e! @?!@4!F@?@ is
i"e+ to be missed!
1 #ate of GST/ <ate for SGST and CGST is not specified in the paper but it is
assured that the same woud be "nown at appropriate time! The rates in GST
re%ime woud be,
1 =ecessities, 7ower <ate
1 Goods of basic importance, Standard rate
1 Precious meta, Specia rate
1 Exempted items, =ie <ate
1 Tax credits, The paper specifies that the Credit of CGST woud be avaiabe for
pa+ment of CGST and credit of SGST woud be avaiabe for pa+ment of SGTS! -t
is aso assured that) in due course) the rues for ta"in% and utiiBation of credit
for the Centra GST and the State GST woud be prescribed and woud be on
simiar ines!
Fortunate+) cross utiiBation of tax credit between the Centra GST and the State
GST woud be aowed in the case of inter;State supp+ of %oods and services
under the -GST mode!
1 -nterstate GST (-GST) / Centre Government woud ev+ -GST (which woud be
CGST pus SGST) on a inter;State transactions of taxabe %oods and services
with appropriate provision for consi%nment or stoc" transfer of %oods and
services! The inter;State seer wi pa+ -GST on vaue addition after ad9ustin%
avaiabe credit of -GST) CGST) and SGST on his purchases! The Exportin% State
wi transfer to the Centre the credit of SGST used in pa+ment of -GST! The
-mportin% deaer wi caim credit of -GST whie dischar%in% his output tax
iabiit+ in his own State! The Centre wi transfer to the importin% State the
credit of -GST used in pa+ment of SGST!
1 .asic threshod, ( dua threshod is proposed for CGST and SGST! For CGST)
the basic exemption for %oods woud remain at <s! ?!A crores and for services a
simiar exemption woud be provided ater! For SGST) the basic exemption for
%oods and services woud be <s! ?@ a"hs!
1 Composition6 Compoundin% Scheme, There woud be a compoundin% cut;off
at <s! A@ a"h of %ross annua turnover and a foor rate of @!A5 across the
States! The scheme woud aso aow option for GST re%istration for deaers with
turnover beow the compoundin% cut;off!
1 Exports, Exports woud be Bero;rated! Simiar benefits ma+ be %iven to Specia
Economic Cones (SECs)! -t is aso specified that the refund of CGST6SGST shoud
be %ranted in a time bound manner!
1 -mports, .oth CGST and SGST wi be evied on import of %oods and services
into the countr+! Fu and compete set;off wi be avaiabe on the GST paid on
import on %oods and services!
1 Specia -ndustria (rea Scheme / (fter the introduction of GST) the tax
exemptions) remissions etc! reated to industria incentives woud be converted)
if at a needed) into cash refund schemes! <e%ardin% Specia -ndustria (rea
Schemes) it is carified that such exemptions) remissions etc! woud continue up
to e%itimate expir+ time both for the Centre and the States!
1 Taxes to be subsumed, -n CGST the taxes to be subsumed are Centra Excise
Dut+) (dditiona Excise Duties) Service Tax) (dditiona Customs Dut+) common+
"nown as Countervaiin% Dut+ (C2D)) Specia (dditiona Dut+ of Customs ; 45
(S(D)) Excise Dut+ evied under the Medicina and Toietries Preparation (ct)
Surchar%es and cesses!
$hereas SGST wi subsume 2(T6Saes tax) Entertainment tax (uness it is evied
b+ the oca bodies)) 7uxur+ Tax) Taxes on otter+) bettin% and %ambin%) State
Cesses and Surchar%es in so far as the+ reate to supp+ of %oods and services)
Entr+ tax not in ieu of 8ctroi!
1 Products outside GST re%ime, -tems containin% (coho and petroeum
products wi be outside the GST re%ime! /owever in respect of E Purchase Tax 0
no decision is made whether it shoud be part if GST re%ime or outside it!
1 Compiances and procedures, The assessees woud be aotted P(= based
re%istration numbers and woud be re>uired to fie periodic returns for SGST L
CGST! (so) appropriate accountin% codes wi be prescribed for Centra GST and
State GST separate+!
1 (dministration, (dministration of CGST and SGST woud be parae meanin%
SGST wi be administered b+ State Government and CGST b+ Centra
Government! -n view of the introduction of GST) -T -nfrastructure wi be
improved! Further) re>uisite Constitutiona amendments wi aso be carried out!
-t is mentioned that specific provisions woud aso be made to the issues of
dispute resoution and advance ruin%!
-t is apparent that now paper %ives carit+ on man+ fronts thou%h carit+ sti
eudes on the taxabe event in GST) rate) carr+ forward of cenvat credit etc!
/owever) these thin%s too wi achieve certaint+ in due course!

-2ick to Print -2ick to -2ose
T+is edition of DDT is a22 a0out GST and toda)=s DDT 0ears a nice nu.0er $ & < >7
T4OL9DDT $&<>
$$7$$7&''(
?ednesda)
GST is not si.p2) V1T p2us service tax 9 First Discussion paper 4t=s a22
win9win;
@GST is not si.p2) V1T p2us service tax but an improvement over the
previous s+stem of 2(T and dis9ointed service tax! /owever) for this GST to be
introduced at the State eve) it is essentia that the States shoud be %iven the
power of ev+ of taxation of a services! This power of ev+ of service taxes has
so on% been on+ with the Centre!') sa+s the First Discussion Paper On
Goods and Services Tax 4n 4ndia% reeased +esterda+!
( Constitutiona (mendment wi be made for %ivin% this power aso to the
States! Moreover) with the introduction of GST) burden of Centra Saes Tax
(CST) wi aso be removed! The GST at the State;eve is) therefore) 9ustified for
(a) additiona power of ev+ of taxation of services for the States)
(b) s+stem of comprehensive set;off reief) incudin% set;off for cascadin% burden
of CE=2(T and service taxes)
(c) subsumin% of severa taxes in the GST and
(d) remova of burden of CST! .ecause of the remova of cascadin% effect) the
burden of tax under GST on %oods wi) in %enera) fa!
The GST at the Centra and at the State eve wi thus %ive more reief to
industr+) trade) a%ricuture and consumers throu%h a more comprehensive and
wider covera%e of input tax set;off and service tax setoff) subsumin% of severa
taxes in the GST and phasin% out of CST! $ith the GST bein% proper+
formuated b+ appropriate caibration of rates and ade>uate compensation where
necessar+) there ma+ aso be revenue6resource %ain for both the Centre and the
States) primari+ throu%h widenin% of tax base and possibiit+ of a si%nificant
improvement in tax;compiance! -n other words) the GST ma+ usher in the
possibiit+ of a coective %ain for industr+) trade) a%ricuture and common
consumers as we as for the Centra Government and the State Governments!
The GST ma+) indeed) ead to the possibiit+ of coective+ positive;sum %ame!
-GST% SGST and 4GST 9 t+e future 2anguage of taxation
$hie the Discussion paper on GST repeated+ emphasised that it is aimed at
removin% the cascadin% effect that sti exists after the CE=2(T62(T re%ime) it
convenient+ did not hi%hi%ht the expansion of the centra tax to post
manufacturin% activities) the burden of which cannot be insi%nificant! (t present)
Centra Excise dut+ is evied on+ on manufacture of %oods) but not on
subse>uent tradin%! -n the GST era) there wi be CGST ti the retaier and a the
deaer vaue additions are brou%ht in the tax net!
4GST *ow wi22 0e 4nter9State Transactions of Goods and Services 0e
taxed under GST in ter.s of 4GST .et+odK (n iustration,
The scope of -GST Mode is that Centre woud ev+ -GST which woud be CGST
pus SGST on a inter;State transactions of taxabe %oods and services! The
inter;State seer wi pa+ -GST on vaue addition after ad9ustin% avaiabe credit
of -GST) CGST) and SGST on his purchases! The Exportin% State wi transfer to
the Centre the credit of SGST used in pa+ment of -GST! The -mportin% deaer wi
caim credit of -GST whie dischar%in% his output tax iabiit+ in his own State!
The Centre wi transfer to the importin% State the credit of -GST used in
pa+ment of SGST!
-ustration,
Sa+ CGST is 3 ?@5 and SGST 3 ?@5
-GST is ?@1?@ M F@5
7et us sa+ the vaue of %oods exported from one state to the other is <s ?@@6;
-GST to be coected b+ the Centre M <s F@6;
(ssumin% <s A each was paid from the credit of SGST) CGST and -GST and the
remainin% <s A in cash) then,
The exportin% state wi transfer <s A (SGST credit) to the Centre (as Centre has
%ot on+ <s ?A in the form of CGST (<s A)) -GST (<s A) and <s A in cash!
The bu+er in the importin% state can use the -CGST Credit for pa+ment of SGST!
The Centre wi pa+ this amount of <s F@ -CGST to the importin% State!
GST 9 4.port 3 export of services destination 0ased consu.ption tax
t+eor) is 0ack;
The issue of decidin% what is import6export in respect of services has created a
ot of disputes and discussions! Thou%h there are separate rues to decide what
constitutes export6import of a service) diver%ent views are ta"en b+ different
formations! The Discussion Paper on GST proposes to foow the destination
principe to decide the basis on which the revenue wi accrue to a state!
The paper states,;
GST on 4.ports/ The GST wi be evied on imports with necessar+
Constitutiona (mendments! .oth CGST and SGST wi be evied on import of
%oods and services into the countr+! The incidence of tax wi foow the
destination principe and the tax revenue in case of SGST wi accrue to the State
where the imported %oods and services are consumed! Fu and compete set;off
wi be avaiabe on the GST paid on import on %oods and services!
GST Discussion Paper 1nd s2ip s+ows
The Discussion paper states)
The shortcomin% in CE=2(T of the Government of -ndia ies in non-inclusion of
several Central taxes in the overall framework of CENVAT, such as additional
customs dut) surchar%es) etc!) and thus "eepin% the benefits of comprehensive
input tax and service tax set;off out of reach for manufacturers6 deaers!
(dditiona Customs Dut+ is cenvattabeN
The paper states)
Para $7A Su0se:uent2)% after -onstitutiona2 1.end.ent e.powering
t+e -entre to 2ev) taxes on services% t+ese service taxes were a2so
added to -NV1T in &''>9'B7
Was the levy unconstitutional prior to this amendment?
GST -ertain Not fro. $7>7&'$'
-f there is an+thin% certain about GST) it is that it cannot be impemented from
?!4!F@?@!
(ddressin% the meetin% of the Empowered Committee of State Finance Ministers
:nion Finance Minister Pranab Mu"her9ee said)
The proposed Goods and Services Tax (GST) can deiver on a these promises
on+ if it has the foowin% essentia features,
(i) -t is comprehensive in scope and appies to as ar%e a ran%e of %oods and
services as possibe b+ minimiBin% the number of exemptions to a sma ist of
essentia items which impact the common man! To the extent possibe) the
exemption ists of the States and the Centra Government are in ai%nmentO
(ii) The rates of tax of CGST and SGST ta"en to%ether are moderateO
(iii) The rates of tax of SGST and exemptions from SGST are uniform throu%hout
the countr+ so that a %iven set of %oods and services invites the same tax
treatment in ever+ StateO
(iv) The input credit chain is seamess coverin% the entire vaue chain from
manufacturin% to retai without brea"s re%ardess of whether %oods or services
are suppied within a State or across State boundariesO
(v) (s far as possibe) ever+ transaction in the tax net bears both CGST and
SGSTO
(vi) The tax treatment of %oods and services is simiarO
(vii) The Centra and State evies are fu+ neutraiBed in the case of exports (out
of -ndia)O and
(viii) The procedures are simpe and harmoniBed between the Centre and the
States!
/e had the ast au%h when he said)
&8n our part) - assure +ou that the recommendations and su%%estions made in
the Discussion Paper woud receive our in;depth and meticuous attention so that
we are abe to 9oint+ finaiBe the structure and desi%n of GST at the eariest!'
So what was reeased +esterda+ was on+ the States0 proposa
and the Centre wi come out with its proposas soon!
"efore $7>7&'$'% is it possi02e to
(i) Get the constitution amendedK
(ii) Get the aw reatin% to Centra GST passed b+ PariamentK
(iii) Get the aws reatin% to State GST passed b+ a State e%isaturesK Do the+
have a mode e%isationK
(iv) Get the computers read+ to capture and mana%e dataK (re a the States -T
read+K
$e have 9ust four and a haf months to do a these and even assumin% that b+ a
mirace) we are abe to do a the above) what if the scheme is sta+ed b+ a /i%h
CourtK
The Direct Taxes Code which is proposed to ta"e off in F@?? is aread+ in the
pubic domain and the <evenue Secretar+ is aread+ into his road shows
promotin% the code! The GST which is to come into effect a +ear earier is +et to
have a code) but there wi be road shows) the first of which is to be hed this
wee"end!
GST wit+ T4OL
$e wi cover the GST for +ou as nobod+ can or wi! Toda+ we are brin%in% +ou
three artices from top experts in the fied! $e aso pan to introduce a feature
where +ou can upoad +our comments) >uestions) su%%estions) etc) without
editoria interference! $e hope our eni%htened =etiBens woud use this
opportunit+ in a responsibe wa+ so that there is heath+ discussion and usefu
su%%estions which we can pass on to the (uthorities concerned!
.e with us T4OL #CN CP TO GST7
Durisprudentio2 T+ursda)=s cases
-entra2 xcise
-envat -redit a22owed on Outdoor -atering Service in appea2 0)
assessee 9 ?+en t+ere is no -envat -redit de.and against t+e
respondent% pena2t) cannot 0e i.posed -ST1T dis.isses #evenue
appea27
T/E Cenvat credit in >uestion is the one avaied of the Service Tax paid on
8utdoor Caterin% Service and the amount invoved is <s!?)FA)HGG6;! The ori%ina
authorit+ denied this credit sa+in% that this cannot at a be caed an E-nput
Service0 in terms of the CC<) F@@4! /e aso imposed an e>uivaent penat+! The
ar%e scae manufacturer too" the matter to the Commissioner ((ppeas) who
too too" a simiar view exceptin% that he reduced the penat+ to <s!?A)@@@6;
sa+in% that the issue concerns interpretation of the e%a provisions! This was in
the month of (pri) F@@H when the 7ar%er .ench decision in GTC -ndustries was
awaited!
4nco.e Tax
F2oricu2ture and tissue cu2ture 0usiness covered under agricu2tura2
inco.e exe.pted 9 4T1T
(s is evident from a pain readin% of the e%a provision under section F (?()(b)
(i)) a that is to be seen for this purpose is whether the and is sub9ected to and
revenue or is sub9ect to a oca rate assessed and coected b+ the officers of the
Government as on an a%ricutura and! There are no other conditions imposed
under the statute so far the >uaitative test for and is concerned! 8nce an+ one
of these two tests are satisfied) nothin% further needs to seen so far as the
nature of and is concerned!
-usto.s
Depart.ent 2oses #s7 (7& crores of custo.s dut) and .aEor pena2ties
due to +a2f 0aked investigation and poor2) drafted s+ow cause notice
-ST1T sets aside -o..issioner=s order confir.ing dut) de.and and
i.position of pena2ties
T*# were innumerabe instances where <evenue ost cases due to haf ba"ed
efforts put in investi%ation and shodd+ draftin% of show cause notices! Man+ a
time investi%atin% officers stumbe upon a fantastic case which cear+ points to
evasion of duties but coud not sava%e an+ of it due to shodd+ wor" in piecin%
to%ether the information and brin%in% out the various aspects in the show cause
notice and aso fai to identif+ the parties to the show cause notice!
See our co2u.ns To.orrow for t+e Eudge.ents
:nti Tomorrow with more DDT
/ave a nice da+!
Mai +our comments to vi9a+write3taxindiaonine!com

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