Implement GST by April 1, 2011 - Maharashtra Sales Tax Commissioner

TIOL-DDT 122
21!12!200"
Mon#ay
SA$%A& 'hatia, a 1"() IAS O**i+er, Commissioner o* Sales Tax, *eels that ,e sho-l#
p-t the system in pla+e an# ha.e the GST by 1!/!2011! 0e says, 1yo- +an2t #o it in
O+tober, yo- +an2t #o it in September! This is a h-3e re*orm! Central taxes 3ettin3
+ombine# ,ith state taxes as a sin3le tax, It has to be in the be3innin3 o* the year! Then
also ,ith +lear prior noti+e, ,e sho-l# resol.e most o* the problems by April 2010 an#
then set -p the system -pto April 2011 so that ,e +an start!4
'hatia ,as a Member o* almost all the Committees on GST in+l-#in3 the +onstit-tional
amen#ment +ommittee! 0e notes that altho-3h empo,ere# +ommittee +onsists o* state
*inan+e ministers b-t 3o.ernment o* In#ia representati.es are also present in that! There
is an a#.isor o* *inan+e minister, the a##itional se+retary is present, the 5oint se+retary is
present an# they ha.e been present in all the #eliberations b-t ,hen paper +ame o-t6 the
paper +ame o-t as the *irst #is+-ssion paper o* empo,ere# +ommittee o* state *inan+e
ministers an# not a 5oint paper! So that in#i+ates that there are some iss-es to#ay bet,een
GOI an# the states also!
0is +omments on some 7ey iss-es8
GST an# rates
On+e the +as+a#in3 3oes the rates ha.e to +ome #o,n! Se+on# reason *or the rates to
+ome #o,n *inally ,o-l# be the ,i#enin3 o* the tax base be+a-se ser.i+e tax has a
separate base, 3oo#s ha.e to#ay a separate base ,hen they +ombine to3ether the base
be+omes ,i#ene#! Similarly simpli*y tax str-+t-re then possible re#-+tion in pri+es9
1!/: o* 3ross #omesti+ pro#-+t ;GD<= 3ro,th!
>hat #oes 1!/: amo-nt to?
It amo-nts to more than @s )0 La7h Crore o* 3ro,th in the e+onomy ,ith this +omin3 in!
Central taxes ,hi+h are 3ettin3 s-bs-me#, ex+ise mainly +entral ex+ise an# its relate#
taxes6 ser.i+e tax, a##itional +-stoms #-ty, the CAD is part o* this an# all its s-r+har3es
an# +esses these are the +entral taxes ,hi+h are +omin3 in! >hat are the State taxes ,hi+h
are 3ettin3 into this 9 AAT, entertainment tax, l-x-ry tax, taxes on lottery, bettin3 an#
3amblin3 - State +esses an# s-r+har3es as lon3 as they relate to 3oo#s an# ser.i+es6
>ill Central Sales Tax ;CST= be abolishe#?
CST ,ill be abolishe# on the 3oo#s an# ser.i+es ,hi+h are part o* GST!
Implementation thro-3h m-ltiple stat-tes, altho-3h there are m-ltiple stat-tes b-t that
m-ltiple stat-te is 3oin3 to be +ommonly #e+i#e#! 'asi+ *eat-res o* the la, nee# to be
-ni*orm!
GST rate str-+t-re8
Maharashtra has been propa3atin3 a sin3le rate be+a-se a sin3le rate ,o-l# ha.e +ome to
abo-t SGST ( an# ro-3hly CGST ( or " so ,e +o-l# ha.e abo-t 1: ro-3hly!
Threshol#8
States -ni*ormly #e+i#e# that the threshol# ,ill 3o -p *rom ) la7hs ,hi+h ,e ha.e to#ay
t-rno.er to 10 la7hs an# be+a-se )-10 is not .ery-.ery material an# ex+ept *or the $orth-
Bastern states they ,ere sayin3 b-t ,e #o not ha.e people ,ho are abo.e 10 la7hs so ,e
,on2t ha.e any re.en-es so *or them some spe+ial arran3ement ,ill be ma#e! '-t *or
CGST ,hat ,ill be the threshol#? >hat the states ha.e propose# is 1!) +rore!
Go.ernment o* In#ia has not a3ree# an# this also +reates another problem!
Ori3inal <roblems8 yo- ,ill ha.e to i#enti*y ,hat is the ser.i+e an# yo- ,ill ha.e to
i#enti*y ,hat is 3oo#s! So ,hat #oes that mean 9 all yo-r ori3inal problems o* ,or7s
+ontra+t, ,hat part o* that is ser.i+e an# ,hat part o* that is 3oo#s +ontin-e, all those
problems +ontin-e! >hat ,e are sayin3 is that ,hate.er is the rate *or 3oo#s an# ser.i+es
it sho-l# be the same rate6 it sho-l# not be a #i**erent rate so that ,e #o not ha.e to
i#enti*y ,hat is a 3oo# an# ,hat is a ser.i+e!
Bxporters ,o-l# be Cero rate# an# similar bene*its may be 3i.en to SBD an# s-+h
bene*its ,ill only be allo,e# in the pro+essin3 Cones o* the SBD an# no bene*it o* sales
*rom SBD to #omesti+ tari** ,ill be allo,e# an# that is a +r-x o* the Cero ratin3 o*
exports!
Constit-tional amen#ments are a ma5or iss-e an# ,e ha.e not been able to resol.e this
iss-e! Goo#s a*ter the man-*a+t-rin3 sta3e are in the state list, ser.i+es are in the +entral
list, man-*a+t-rin3 3oo#s are in the +entral list! E-estion is ,hether it sho-l# +ome in the
+on+-rrent list, i* it +omes in the +on+-rrent list, i* there is a #isp-te +entre has the s,ay6
states are not a3reeable to that6 so ,hat is the sol-tion!
This #ea#line o* April 1, 2010 is not possible at all - yo- ha.e to b-il# -p the IGST
mo#el, yo- ha.e to resol.e all this iss-es an# at least *or Maharashtra ,e #o not ,ant a
hal* brea7 sol-tion!
Somethin32s +ome an# then ,e are in a *ix, ,e are neither near nor there so ,e ,o-l# li7e
e.erythin3 to be #one properly, proper +omp-terisation, #o it an# then by April 1, 2011
brin3 it! In *a+t the mista7e ,hi+h ,e ha.e en+o-ntere# earlier, in AAT yo- ,o-l# be
a,are that Maharashtra is the only state ,hi+h shi*te# *rom 3eo3raphi+al 5-ris#i+tion to
*-n+tional 5-ris#i+tion! Other states are still +ontin-in3 ,ith that ,hat is 3eo3raphi+al
5-ris#i+tion! There is a sales tax o**i+er he has a parti+-lar 5-ris#i+tion, he has a ,ar# so
he loo7s a*ter that area! >e shi*te# *rom that to *-n+tional 5-ris#i+tion6 nobo#y has one to
one relationship! >itho-t +omp-terisation that be+ame a h-3e iss-e *or -s! For *irst year
,e ,ere *a+in3 a lot o* problems no, ,hen the +omp-terisation is ta7in3 pla+e an# it is
+ome to a parti+-lar sta3e *-n+tional is m-+h better- all other states are +omin3 *or,ar#
an# #oin3 it! >e #o not ,ant to +ommit the same mista7e a3ain! Let -s ha.e some le.el
o* +omp-terisation! Let -s ha.e those ret-rns pro+essin3 areas, pro+essin3 metho#s an#
then by April 1, 2011 let -s #o it!



<ropose# GST @e3ime8 '-siness Con+erns an# <ossible Iss-es
DBCBM'B@ 21, 200"
Dipti Doshi
'GSI$BSS or3aniCations +an hea.e a si3h o* relie* ,ith the almost-o**i+ial
anno-n+ement o* postponement o* the GST #ea#line o* April 1, 2010! This means that
the b-siness or3aniCations so *ar inH-isiti.ely 3ettin3 -p#ate# ,ith GST relate# ti#in3s
,o-l# a+t-ally nee# to 3ear -p to -n#erstan# ho, this ne, tax ,ill impa+t their
operations, at least *rom a ma+ro perspe+ti.e to start ,ith! Ieepin3 in min# s-+h short
span o* time a.ailable, it ,ill be+ome essential *or any b-siness or3aniCation to boost -p
its system an# reso-r+es *or smooth transition to GST tax re3ime!
Gn#o-bte#ly, there ,ill be .ario-s iss-es an# b-siness +on+erns ,hi+h ,ill +ome alon3
,ith this ne, propose# re3ime! <ast experien+e pro.es that any ne, tax re3ime brin3s
,ith it .ario-s 7no,n an# -n7no,n iss-es to be #ealt ,ith! 0en+e, it is essential *or
b-siness or3aniCations to 7no, the nitty-3ritty an# be ,ell .erse# ,ith all the aspe+ts o*
the propose# tax re3ime so as to a.oi# any tax losses an# also *or the smooth transition to
GST!
Me+hanism to tax inter-state s-pplies
It is essential to #etermine the most s-itable me+hanism to tax inter-state s-pplies -n#er
#estination base# +ons-mption re3ime! Tho-3h, .ario-s mo#els to tax inter-state s-pplies
ha.e been #is+-sse# by the Bmpo,ere# Committee an# the Central Go.ernment, it seems
the JIGST Mo#el2 may be sele+te# *or the p-rpose o* taxin3 inter-state transa+tions!
Gn#er IGST mo#el, an in#epen#ent +learin3 a3en+y ,o-l# be appointe# to a+t as a
*a+ilitator bet,een +entre an# states! One o* the most si3ni*i+ant +han3e *rom the existin3
system to GST re3ime may be imposition o* GST e.en on sto+7 trans*ers *rom one state
to another!
It is imperati.e *or any or3aniCation to -n#erstan# the nitty-3ritty o* GST an# its str-+t-re
in+l-#in3 the +omplete -n#erstan#in3 o* IGST mo#el to a++or#in3ly ma7e its IT system,
#o+-mentation an# a++o-ntin3 system GST +ompatible!
Taxation o* ser.i+es -n#er GST
Gn#er propose# GST, there may be a #e*inition o* the term 1Ser.i+e4! It ,ill also ha.e a
spe+i*ie# list o* exempte# ser.i+es! F-rther, all the ser.i+es are propose# to be taxe# at a
sin3le rate -ni*ormly a+ross In#ia, -nli7e 3oo#s ,ith more than one GST rate!
The ma5or +hallen3e ,ill be the taxation o* inter-state s-pply o* ser.i+es -n#er the State
GST to a.oi# tax #isp-te on ,hi+h state has 5-ris#i+tion to +olle+t State GST! This ,ill be
a##resse# ta7in3 into a++o-nt #i**erent +riteria li7e lo+ation o* asset relatin3 to ,hi+h
ser.i+e is pro.i#e#, per*orman+e o* ser.i+e an# a##ress o* the establishment ,here
ser.i+e is re+ei.e#K -se#! F-rther, it ,ill pro.i#e pro.isions as re3ar#s .ario-s
+onsi#erations li7e Classi*i+ation o* ser.i+es, import an# export o* ser.i+es, re.erse
+har3e me+hanism, #etermination o* pla+e o* s-pply o* ser.i+e an# +omplian+e
pro+e#-res et+!
Other iss-es an# b-siness +on+erns
'esi#es the abo.e t,o ma5or iss-es, there are .ario-s other iss-es an# b-siness +on+erns
in.ol.e# in +han3in3 o.er to the propose# GST s-+h as
;i= Treatment o* +arrie# *or,ar# tax +re#it -n#er CB$AAT an# state AAT
;ii= Transitional <ro.isions
;iii= Treatment to existin3 exemptions an# bene*its 9 lo+ation base# an# pro#-+t base#
;i.= Impa+t o* #o-ble taxation in +ase o* +ontin-ity o* ele+tri+ity #-ty an# spe+i*i+ +ess
;.= Treatment *or ,or7s +ontra+ts
;.i= Taxability in +ase o* s-b-+ontra+tor
;.ii= Treatment o* 3oo#s sent *or 5ob ,or7 or *or pro.i#in3 temporary ser.i+es
;.iii= Stan#ar#isation o* systems an# pro+e#-res at national le.el amon3 all States
;ix= Iss-es relate# to +omplian+e reH-irements in+l-#in38
@e3istration reH-irements,
<ayment o* tax an# *ilin3 o* ret-rns,
@e+or#s to be maintaine#,
A++o-ntin3 an# IT system,
CB$AAT @e+or#s
;x= Bli3ibility an# -tiliCation o* tax +re#it in+ase o* inp-ts, inp-t ser.i+es an# +apital
3oo#s
;xi= @e*-n# pro+e#-res
;xii= Taxability in+ase o* -nre3istere# #ealer
;xiii= Constit-tional amen#ment
;xi.= Appli+ability o* GST ,here ser.i+e pro.i#er or re+ipient is in the State o* %amm-
an# Iashmir
In .ie, o* the abo.e, it is imperati.e *or the b-siness or3aniCation to i#enti*y ma5or
iss-es relatin3 to their b-siness an# start ,or7in3 on it *rom no, on,ar#s, rather than
,aitin3 *or the ne, re3ime to +ome in to e**e+t! It essential *or b-siness or3aniCations to
7no, the nitty-3ritty an# be ,ell .erse# ,ith all the aspe+ts o* the propose# tax re3ime so
as to a.oi# any tax losses an# also *or the smooth transition to GST! Certain 3ro-n#,or7
+an be3in the moment ,hite paper is ma#e a.ailable to p-bli+! F-rther, the IT an#
a++o-ntin3 system +an be #esi3ne# on+e the #ra*t GST is ma#e a.ailable *or p-bli+
+omment! S-+h preliminary ,or7 ,ill #e*initely a.oi# last moment hassle an# most
importantly tax losses +an be a.oi#e# by bein3 proa+ti.e!
;The a-thor ,or7s ,ith Ihaitan L Co=