Model GST Law suggests multiple registrations in each State for supply of goods and services. “This has the potential to result in huge burden of complexity as companies operate in many different States. Businesses in the services sector such as telecom, banking, insurance, airlines, e-commerce, undertake pan-India operations, meeting requirements of each State through different registrations, audits and compliances would be a massive task”, said Dr Naushad Forbes, President, Confederation of Indian Industry. Dr Forbes further stated that “a centralized registration system should be instituted under GST. States could be offered credits through the Integrated GST (IGST) mechanism. Such a system would greatly simplify ease of doing business and foster better tax compliance.”
On multiple GST rates, CII has said that GST rates structure can be absolute limit of four rates as suggested by the Government, and over time, the Government should commit to converge to one or two rates. Further, CII has said that it is also important that the bulk of goods and services should fall within the standard rate of 18% and only as exception to go to the higher rate of 28% and a lower rate for essential goods such as unprocessed food items, etc. CII agrees with the proposal that the higher rate of 28% should apply only to ‘demerit goods’ and the term “Luxury” goods should not be used to define this category, stated the CII Release.
CII has further suggested that the Cess needs to be levied only at the final product and total tax including Cess on demerit goods should be kept within the present overall indirect tax incidence.
GST Law does not clarify if administration of GST for assessment and audits is to be undertaken by the Central Government or by State governments. “It would be challenging for companies to meet the requirements of dual administration by both the Central and State governments, while maintaining consistency across different filings. Likewise, it could be an additional burden for the administration in terms of duplication and costs. There should be a single administration process, either by the Center or the State, which would be acceptable to both. This would action the intention of making India a common market with single audit and assessment” said Dr Forbes. He further added that for all purposes of calculating taxes under GST, only the invoice value should be considered.
Dr Forbes further emphasized on the transition to GST issues and stated that “transition is expected to entail a period where companies have higher inventories and it is necessary to deal with these stocks of goods in terms of applicable tax. GST Law does not clearly specify if credit is available on excise duty and central sales tax paid on inventories of domestic goods, and on countervailing duty (CVD) paid for imported goods. Clarity on this aspect needs to be provided”, said the CII President.
Introducing a national tax reform of the magnitude that impacts every consumer and millions of producers is certainly not an easy endeavour. “We commend the Central and State governments for strong commitment to the GST. In turn, CII pledges to partner with the government to ensure smooth, hassle-free, and efficient roll-out of the GST so that all stakeholders derive the maximum benefit”, stated Dr Forbes.
New Delhi
3 November 2016