GST A challenge in itself

DECEMBER 04, 2009

By Jeet Oa an! Dee"a# Aga$%al
T&E !isc'ssi(n "a"e$ (n GST %as eage$ly %elc()e! *y h('ses (f t$a!e an! c())e$ce
as it )a$#e! the fi$st c(nst$'cti+e ste" t( the "a$a!ig) shift (f the in!i$ect ta, legislati(ns
t( a c())(n g((!s an! se$+ices ta, -GST./ The e)"(%e$e! c())ittee an! the Cent$e
ha+e e)*a$#e! (n the &e$c'lean tas# (f !$afing the GST legislati(ns/ B't it %('l! *e
i)"e$ati+e f($ the e)"(%e$e! c())ittee t( c(nsi!e$ se+e$al iss'es that the a!+ent (f
GST %('l! *$ing al(ng %ith it/
0ss'e 12 Diffic'lties in C(nstit'ti(nal a)en!)ents
As )enti(ne! in the !isc'ssi(n "a"e$ the GST "$("(se! t( *e i)"le)ente! in 0n!ia
%('l! *e a !'al GST c()"$ising (f a t%( tie$ ta, $egi)e %he$ein the States an! the
Cent$e %('l! in!e"en!ently a!)iniste$ an! le+y ta, (n the s'""ly (f all g((!s an!
se$+ices/
0t is "e$tinent t( n(te that 'n!e$ the "$e+alent in!i$ect ta, st$'ct'$e, the C(nstit'ti(n
e)"(%e$s the Cent$e t( le+y ta, (n the )an'fact'$e, i)"($t (f g((!s an! $en!iti(n (f
se$+ices/ 3'$the$ the States a$e e)"(%e$e! t( le+y an! c(llect ta, (n the sale (f g((!s
an! )an'fact'$e (f ce$tain "$(!'cts s'ch as alc(h(l, t(*acc( etc/
0n light (f the a*(+e !is"a$ity (f ta,ing "(%e$s *et%een the Cent$e an! States, a
C(nstit'ti(nal a)en!)ent %('l! *e $e4'i$e! in ($!e$ t( e)"(%e$ the Cent$e t( le+y ta,
'" t( the $etail stage an! in ($!e$ t( e)"(%e$ the States t( le+y ta, (n se$+ices/ Sche!'le
5 (f A$ticle 246 (f the C(nstit'ti(n (f 0n!ia s"ecifies the 7 lists +i/, 8ni(n , State an!
C(nc'$$ent 9ist/ As the na)e s'ggests the Cent$e is e)"(%e$e! t( )a#e la%s %ith
$es"ect t( the 8ni(n list %he$eas the States a$e e)"(%e$e! t( )a#e la%s %ith $es"ect t(
the State list/ The C(nc'$$ent list c(ntains ent$ies (n %hich *(th the Cent$e an! the State
can )a#e la%s/ C'$$ently se$+ices a$e ta,e! 'n!e$ the $esi!'al ent$y 95 (f the 8ni(n list
an! sale (f g((!s a$e ta,e! 'n!e$ ent$y :4 (f the State list/ C(nse4'ently the "(%e$ (f the
t%( ent$ies nee!s t( *e integ$ate! an! inc($"($ate! int( each (f the t%( lists/
An(the$ alte$nati+e f($ %elc()ing GST c('l! *e 'n!e$ the aegis (f A$ticle 26;A (f the
C(nstit'ti(n %hich "$(+i!es that ta, (n se$+ices th('gh le+ie! *y the 8ni(n can *e
a!)iniste$e! an! a""$("$iate! *y the States/ 0n (the$ %($!s, the C(nstit'ti(n all(%s f($
an a$$ange)ent %he$ein the 8ni(n %('l! le+y ta, (n se$+ices an! sha$e a "($ti(n (f the
$e+en'e %ith the States/ 0n ($!e$ t( ta, se$+ices 'n!e$ A$ticle 26;A, an a)en!)ent
%('l! *e $e4'i$e! in the 8ni(n list %he$e*y se$+ices %('l! ha+e t( *e ta,e! 'n!e$ ent$y
92C -%hich "e$tains t( the ta,ati(n (f se$+ices. instea! (f the $esi!'al ent$y 95 (f the
8ni(n list/
A <(int %($#ing g$('" has *een set '" f($ s'ggesting a s'ita*le C(nstit'ti(nal
a)en!)ent f($ %elc()ing GST/ &(%e+e$ the C(nstit'ti(nal a)en!)ent can ta#e "lace
(nly (nce the *ill is int$(!'ce! in "a$lia)ent an! a""$(+e! *y th$ee f('$th )a<($ity an!
s'*se4'ently $atifie! *y :0= (f the State legislat'$es/
0n light (f the a*(+e the C(nstit'ti(nal a)en!)ent %ill n(t g(ing t( *e an easy tas#
ahea!/ The$e )ay *e se+e$al "(litical fact($s %hich )ay significantly !elay the $(ll ('t (f
GST/
0ss'e 22 Diffic'lty in fi,ing $ate
The int$(!'cti(n (f GST is "$i)a$ily t( *$ing a*('t 'nif($)ity in the in!i$ect ta,
st$'ct'$e in 0n!ia / A se+e$e sh($tc()ing (f the e,isting >AT legislati(ns is that each
State en<(ys its (%n a't(n()y in le+ying ta, (n the sale (f g((!s $es'lting in a %i!e
!iffe$ence in the $ate (f ta, a""lica*le t( i!entical g((!s s(l! in !iffe$ent States/
0n light (f the a*(+e the$e sh('l! *e a c())(n c(nsens's a)(ngst the States %ith
$es"ect t( the $ate (f ta, that is t( *e a""lica*le f($ the s'""ly (f g((!s an! se$+ices/
S'ch c(nsens's %('l! *e !iffic'lt t( achie+e in "$actice, c(nsi!e$ing the !is"a$ity an!
)'lti"licity (f nat'$al $es('$ces, nat'$e (f *'siness acti+ities, c'lt'$al an! s(cial +al'es
"$e+alent in each State/ 3($ e,a)"le the sale (f li4'($ in the State (f G'<a$at att$acts a
$ate (f 62/:= %he$eas the sale (f the sa)e li4'($ %('l! att$act a $ate (f 20= in the State
(f Maha$asht$a / 0n a!!iti(n t( the sa)e, +a$i('s States ha+e "$esc$i*e! +a$i('s
c()"(siti(n sche)es %ith !iffe$ent c()"(site $ates/
Des"ite the a*(+e h'$!les face! %ith the int$(!'cti(n (f State >AT $egi)e, the !isc'ssi(n
"a"e$ clea$ly )enti(ns that the State GST %('l! *e i)"le)ente! th$('gh a !iffe$ent
stat'te f($ each State/ This "$("(sal (f the g(+e$n)ent !(es n(t ins"i$e )'ch c(nfi!ence
in instit'ting 'nif($)ity in the in!i$ect ta, st$'ct'$e as in a case %he$e the States c(ntin'e
t( en<(y the "(%e$ t( !$aft thei$ (%n legislati(ns f($ le+ying ta,, the$e a$e *('n! t( *e
!is"a$ities in the $ate st$'ct'$e an! (the$ "$(+isi(ns/
0n light (f the a*(+e it is i)"e$ati+e that the States $each a c())(n c(nsens's %ith
$ega$! t( the $ate st$'ct'$e in ($!e$ t( si)"lify the ta, st$'ct'$e an! '"h(l! the "$i)e
"'$"(se (f GST i/e/ 'nif($)ity /
0ss'e 72 Regist$ati(n f($ assessee c(n!'cting *'siness ("e$ati(ns in )'lti"le States
As )enti(ne! ea$lie$, the GST "$("(se! t( *e i)"le)ente! in 0n!ia %('l! *e a !'al GST
%he$ein the Cent$e an! the States %('l! in!e"en!ently a!)iniste$ an! le+y ta, (n the
s'""ly (f g((!s an! se$+ices/ C(nse4'ently a t$ansacti(n (f s'""ly %('l! *e s'*<ect t(
CGST as %ell as SGST/ This !e+ice (f ta,ati(n c('l! "$(+e t( *e t$('*les()e f($
s'""lie$s c(n!'cting *'siness in )($e than (ne State/ The le+y (f CGST %('l! n(t ca'se
)'ch !iffic'lty as the ta, s( "ai! %('l! *e c$e!ite! t( the Cent$e i$$es"ecti+e (f the State
in %hich the s'""lies a$e )a!e/ C(nse4'ently f($ CGST, a s'""lie$ c(n!'cting *'siness
f$() !iffe$ent "$e)ises in !iffe$ent States )ay (*tain a cent$alie! $egist$ati(n f($ all his
"$e)ises l(cate! in !iffe$ent States an! !ischa$ge his ta, lia*ility f$() a single l(cati(n
-i/e/ hea! (ffice./ &(%e+e$ the chief c(nce$n (f s'ch s'""lie$s %('l! *e %ith $es"ect t(
!ischa$ging SGST lia*ility/ As )enti(ne! ea$lie$ each (f the States %('l! in!e"en!ently
le+y an! c(llect thei$ (%n SGST/ C(nse4'ently a s'""lie$ ha+ing "$esence in )'lti"le
States %('l! *e $e4'i$e! t( (*tain $egist$ati(n in each (f the States an! !ischa$ge SGST
(n the t'$n (+e$ (f s'""lies )a!e *y his "$e)ise ($ "$e)ises in that "a$tic'la$ State as is
the c'$$ent "$actice %ith >AT/ S'ch $e4'i$e)ent (f $egist$ati(n %('l! again $es'lt in
e,cessi+e "a"e$ %($# an! significant inc$ease in a!)inist$ati(n c(st/
8n!e$ the c'$$ent st$'ct'$e (f in!i$ect ta,ati(n, the Cent$e al(ne is e)"(%e$e! t( le+y
ta,es (n se$+ices/ C(nse4'ently se$+ice "$(+i!e$s $en!e$ing se$+ices th$('gh !iffe$ent
"$e)ises in !iffe$ent States a+ail the *enefit (f cent$alie! $egist$ati(n %he$ein they a$e
$e4'i$e! t( (*tain a single $egist$ati(n ce$tificate an! !ischa$ge thei$ ta, lia*ility th$('gh
a cent$alie! l(cati(n/
?ith the a!+ent (f a !'al GST a se$+ice "$(+i!e$ $en!e$ing se$+ices th$('gh )($e than
(ne "$e)ise %('l! nee! t( (*tain a se"a$ate $egist$ati(n in each State f($ the "'$"(se (f
!ischa$ging SGST/ This in t'$n %('l! inc$ease the a!)inist$ati+e c(st f($ the "$(cess (f
$egist$ati(n/
0n light (f the a*(+e the a!+ent (f GST %('l! inc$ease the c()"le,ity (f the 0n!ian ta,
st$'ct'$e $athe$ than si)"lifying the sa)e/ As a $es'lt (f %hich a c()"$ehensi+e an!
'nif($) "$(cess (f $egist$ati(n is $e4'i$e! t( *e f($)'late! %hich %('l! si)"lify ta,
c()"liances an! '"h(l! (ne (f the )any "'$"(ses (f the int$(!'cti(n (f GST that is
si)"licity /
0ss'e 42 E,e)"ti(ns an! a+ail)ent (f in"'t c$e!it the$e(f2
The "$e+alent in!i$ect ta, st$'ct'$e in 0n!ia h('ses a )y$ia! (f e,e)"ti(ns t( se$+ice
"$(+i!e$s an! )an'fact'$e$s %hich !e"en! (n the f'lfill)ent (f +a$i('s c(n!iti(ns %hich
a$e s"ecific t( each e,e)"ti(n/ 3'$the$ the CE@>AT R'les !( n(t "e$)it a "$(+i!e$ (f
e,e)"t se$+ices ($ )an'fact'$e$ (f e,e)"t g((!s t( a+ail the *enefit (f in"'t ta, c$e!its/
This in t'$n ha)"e$s the f$ee fl(% (f c$e!its !(%n the s'""ly chain an! inc$eases
casca!ing effect %hich in t'$n is "asse! (n t( the c(ns')e$ as a!!iti(nal c(st in the final
"$ice (f the g((!s ($ se$+ices/
As a $e)e!y t( the a*(+e iss'e GST "$("(ses t( !( a%ay %ith the n')e$('s e,e)"ti(ns
an! e,ten! the *enefit (f the sa)e in f($) (f cash $ef'n!s ($ th$('gh +a$i('s +al'ati(n
"$(+isi(ns/ This %('l! t( a g$eat e,tent facilitate a c(ntin'('s fl(% (f in"'t ta, c$e!it
ac$(ss the s'""ly chain/
@(t%ithstan!ing any (f the a*(+e, ce$tain en! 'se$ *ase! e,e)"ti(ns %('l! c(ntin'e t(
*e "$e+alent in s()e f($) ($ the (the$/ 3'$the$ the in"'t ta, c$e!it "$(+isi(ns %('l! *e
*ase! (n the ca$!inal )a,i) (f +al'e a!!iti(n an! as a "$i($y t( the sa)e, a s'""lie$ (f
e,e)"t s'""lies %('l! *e !enie! the *enefit (f in"'t ta, c$e!its/
0n s"ite (f the a*(+e sh($tc()ings, the "$("(sal (f !(ing a%ay %ith a )a<($ity (f the
e,e)"ti(ns is a "(siti+e ste" in facilitating the f$ee fl(% (f in"'t ta, c$e!it an!
i)"le)enting a si)"le ta, st$'ct'$e in 0n!ia /
E,e)"ti(n f($ s)all scale in!'st$y2
A significant change that the a!+ent (f GST %('l! *$ing a*('t %('l! *e %ith $es"ect t(
the 'nif($) th$esh(l! li)it *ey(n! %hich s'""lie$s %('l! *e lia*le t( (*tain $egist$ati(n
an! "ay ta,/ C'$$ently the th$esh(l! li)it f($ cent$al e,cise *el(% %hich s)all scale 'nits
!( n(t ha+e t( $egiste$ an! "ay ta, is Rs 1/: c$($e/ 3($ se$+ice ta,, it is Rs 10 la#h/
3'$the$ +a$i('s States "$esc$i*e !iffe$ent th$esh(l! li)its $anging f$() 2 la#hs t( 10
la#hs %ith $es"ect t( the le+y (f State >AT/
GST "$("(ses t( int$(!'ce a 'nif($) th$esh(l! li)it (f an ann'al sales t'$n(+e$ (f Rs/ 10
la#hs (n the s'""ly (f g((!s an! se$+ices at State le+el/ This $ef($) %('l! *$ing int( the
GST ta, net )any s)all scale )an'fact'$es %h( %e$e ea$lie$ e,e)"t *y +i$t'e (f the
th$esh(l! li)it (f Rs/ 1/: c$($es/ &(%e+e$ (n the c(nt$a$y the th$esh(l! li)it (f 10 la#hs
%('l! "$ecl'!e )any s)all scale $eselle$s %h(se sales t'$n(+e$ is *et%een 2 la#hs 10
la#hs an! a$e c'$$ently lia*le t( "ay State >AT/ The th$esh(l! li)it f($ CGST is "$("(se!
t( *e fi,e! at 1/: c$($es/ This %('l! e,cl'!e )any se$+ice "$(+i!e$s %h( %he$e ea$lie$
lia*le t( "ay ta, *y +i$t'e (f the th$esh(l! li)it (f 10 la#hs/
C(nsi!e$ing the a*(+e, it is (*se$+e! that GST ai)s at i)"le)enting a th$esh(l! li)it
%hich is $e+en'e ne't$al an! acce"ta*le t( all i/e/ the States, 8ni(n an! the s)all scale
'nits/
0ss'e :2 >al'ati(n
The ta,a*le e+ent 'n!e$ Cent$al E,cise !'ty is the )an'fact'$e (f e,cisa*le g((!s %hich
is "$("(se! t( *e change! t( the s'""ly (f g((!s 'n!e$ the "$("(se! GST $egi)e/ This
%('l! in t'$n $es'lt in the $e!'n!ancy (f a n')*e$ (f c()"le, +al'ati(n $'les %hich a$e
"$e+alent 'n!e$ the Cent$al E,cise >al'ati(n R'les/
?ith the a!+ent (f the GST $egi)e +al'ati(n %ith $es"ect t( n(n cash an! $elate! "a$ty
t$ansacti(ns (nly %('l! *e (f $ele+ance/ As a $es'lt +a$i('s +al'ati(n )eth(!s s'ch as
MRA +al'ati(n, +al'ati(n %ith $es"ect t( !e"(t clea$ances etc/ )ay *e !(ne a%ay %ith
an! ta, %('l! *e le+ie! (n t$ansacti(n +al'e/
The se$+ice ta, +al'ati(n $'les )ay c(ntin'e t( a""ly in the GST "$(+isi(ns/
0n light (f the a*(+e since the ta,a*le e+ent f($ g((!s as %ell as se$+ices )ay *e change!
t( s'""ly, CGST an! SGST %('l! c(nse4'ently *e le+ie! (n the sa)e ta, *ase as the
ta,a*le e+ents a$e the sa)e/ This )eth(! (f ta,ati(n %('l! *e highly *eneficial an!
%('l! s'*stantially !ec$ease ta, c(st as 'n!e$ the c'$$ent ta, $egi)e State >AT is
cha$ge! (n the $etail +al'e (f the g((!s s(l! %hich is incl'si+e (f Cent$al E,cise D'ties,
State E,cise D'ties etc/ Th's c'$$ently, (ne ta, is cha$ge! (n an(the$ ta, $es'lting in
casca!ing effect/
C(nsi!e$ing the a*(+e +a$i('s *'siness h('ses %('l! *e $e4'i$e! t( $e+ise thei$ "$icing
"(licies in ($!e$ t( fact($ f($ the a*(+e changes an! )(st i)"($tant (f all, t( fact($ f($
the in"'t ta, c$e!its %hich %('l! n(% *e c$(ss c$e!ita*le ac$(ss g((!s an! se$+ices
le+ie! *y the State an! Cent$e/
C(ncl'si(n
The i)"le)entati(n (f GST in 0n!ia is a "ath *$ea#ing change in the st$'ct'$e (f in!i$ect
ta,es e,isting hithe$t(/ 0t is i)"($tant that a !esign is f($)'late! %hich is acce"ta*le t(
all an! ens'$es s)((th ta,ati(n (f g((!s B se$+ices an! c()"liance $elating the$et(/
&(%e+e$ the 3inance Minist$y has c())'nicate! the $(ll ('t (f GST %('l! n(t )eet its
!ea!line (f 1 A"$il 2010 gi+ing the t$a!e an! in!'st$y a little )($e ti)e t( asses the
i)"act (f GST an! acc($!ingly get e4'i""e! f($ the changes that c()e ahea!/
-The a'th($s a$e %ith G$ant Th($nt(n/ The +ie%s e,"$esse! a$e st$ictly "e$s(nal.