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Preparing for Goods & Service Tax

By Shri R. S. Bhatt
Senior Executive Vice-President,
Reliance Industries Ltd.

“Be prepared- Goods and Service Tax (GST) is coming with effect from 01.04.2010”, declared the Finance minister in his Budget Speech for 2009-10. Collaborative efforts led by Empowered Committee of State Finance Ministers have helped reached an agreement on the basic structure of GST in keeping with the principals of fiscal federalism enshrined in the Constitution. The GST would result in abolition of multiple types of taxes on goods and services. Going by global experience, the GST can be a big boon if it has right kind of rate and legislation. It is high time for all concerned, including Chartered Accountants, to start preparing for smooth introduction, implementation and operation of GST. This article explores the concept.

Introduction
In the speech of Budget 2009-10, the Finance Minister Mr Pranab Mukherjee has given a clarion call: “Be prepared – Goods & Service Tax (GST) is coming w.e.f. 01.04.2010.”In two paras he has referred GST.
Para 82: “……. Tax reform, like all reforms, is a process and not an event. Therefore, I propose to pursue structural changes ………….. in indirect taxes by accelerating the process for the smooth introduction of the Goods and Service Tax (GST) with effect from 1st April, 2010.”
Para 85: “I have been informed that the Empowered Committee of State Finance Ministers has made considerable progress in preparing the road map and the design on the GST. Officials from the Central Government have also been associated in this exercise. I am glad to inform House that, through their collaborative efforts, they have reached an agreement on the basic structure in keeping with the principals of fiscal federalism enshrined in the Constitution. I compliment the Empowered Committee of State Finance Ministers for their untiring efforts. The broad contour of the GST Model is that it will be a dual GST comprising of a Central GST and a State GST. The Centre and States will each legislate, levy and administer the Central GST and State GST, respectively. I will reinforce the Central Government’s catalytic role to facilitate the introduction of GST by 1st April, 2010 after due consultations with all stake holders.”
Dr. Asim K. Dasgupta, chairman of Empowered Committee and Revenue Secretary Mr. P. V. Bhide have also reiterated that GST is coming w.e.f. 1.4.2010.
Our Ex-Finance minister  Mr. P. Chidambaram had been making this call in his four budget speeches as given below, which will also throw some light on the type of GST that is coming.
Budget Speech 2004-05 : Para 119: “Now I turn to my indirect tax proposals …. It is my intention to align India’s tariff structure to those of ASEAN countries. Eventually, there should be a uniform rate of tax on goods and services.”
Budget Speech 2005-06 : Para 94: “In the medium to long term, it is my goal that the entire production – distribution chain should be covered by a National VAT, or even better a goods and service tax, encompassing both the Centre and State.”
Budget Speech 2006-07 : Para 155:  “It is my sense that there is large consensus that the country should move towards a National level Goods and Service Tax (GST) that should be shared between the Central and the State. I propose that we set April 1, 2010 as the date for introduction of GST. World over goods and services attract the same rate of tax. That is the foundation of the GST. People must get used to the idea of GST. Hence we must progressively converge the service tax rate and the CENVAT rate…….”
Budget Speech 2007-08 : Para 116:  I wish  to  record my deep  appreciation of  the spirit of co-operative federalism displayed by State Governments and especially their Finance Ministers. At my request, the Empowered Committee of State Finance Ministers has agreed to work with the Central Government to prepare a roadmap for introducing a national level Goods and Services Tax (GST) with effect from April 1, 2010.
Thus it is very clear that GST is coming. So let us be prepared for the same. Industries, trading communities, Central Government and State Government, would be practitioners for GST and as such, all, including we Chartered Accountants, should prepare for the smooth introduction and operation of GST.
Before we list our segment wise required preparations, we must know what happened after the initial above mentioned announcements by Ex-Finance Minister Mr P. Chidambaram and what sort of GST is being proposed.
The real work started with the appointment of Joint Working Group (JWG) by the Empowered Committee of State Finance Ministers to give recommendations regarding detailed framework to be adopted for GST, in May 2007. JWG was given the task to suggest a model for the base and rate structure for GST. The working group was instructed to keep the following in mind:-

  • GST should be so designed that it should be revenue neutral to Centre and States. Interest of the Special Category, North Eastern State and Union Territories have to especially kept in mind.
  • The group will examine different models and see that power of levy, collection and appropriation of revenue needs to be vested in the Centre and the states by looking at the pros and cons.
  • The various models suggested by the working group should ensure that double taxation is avoided.
  • The working group would ensure that the suggested model tasks into account the problems face during interstate transactions and any revenue loss.
  • The working group should consider how zero-rated goods and services and Non-Vat items  such as petroleum goods and alcohol might be treated under new regime.
  • The model developed should reflect the interest of the Centre, State, trade, Industry, agriculture and services.

JWG submitted the report in October 2007 after making study of GST Act of several countries and making study tours of Brazil, Australia and Singapore.
Before we look at the recommendations briefly, let us understand the simple words as to WHAT IS IDEAL GST?
GST is comprehensive value added tax on goods and services it is levied and collected on value addition at each stage of sale or purchase of goods or supply of services based on input tax credit method but without State boundaries. There is no distinction between taxable goods and taxable services   and they are taxes at a single rate in a supply chain of goods and services till the goods/services reach the consumer. The administrative power will be vested with a single authority to levy tax on goods and services. The main features of GST are as under:-

  • It is based on the principal of value added tax and either “input tax credit method” or “subtraction” method, with emphasis on voluntary compliance and accounts based system.
  • Comprehensive levy and collection on both goods and service at the same rate with benefit of input tax credit or subtraction of value of penultimate transaction value.
  • Minimum floor rates of tax, generally not exceeding two rates.
  • No scope for levy of cess, re-sale tax, additional tax, special tax, turnover tax, etc.
  • No scope for multiple levy of tax on goods and services such as sales tax, entry tax, octroi, entertainment tax, luxury tax etc.,
  • Zero rating of exports and interstate sales of goods and supply of services.
  • Taxing of capital goods and inputs whether goods and services relatable to manufacture at lower rate, so as to reduce inventory carrying cost and cost of production.
  • A common law and procedure throughout the country under one single administration.

Main Advantage of Comprehensive GST

  • Introduction of GST would result in abolition of multiple types of taxes on goods and services.
  • Reduces effective rates of tax to one or two floor rates.
  • Reduces compliance cost and increases voluntary compliance.
  • Removes cascading effect of taxation and removes distortion in the economy.
  • Enhances manufacturing and distribution efficiency, reduces cost of production of goods and services, increases demand and production of goods and services.
  • As it is neutral to business processes, business models, organisation structure, geographic location and product substitutes, it will promote economic efficiency and sustainable long term economic growth.
  •  Will give competitive edge in international market for goods and services produced in India, leading to  increased exports.
  • Reduces litigation, harassment and corruption
  • Will result in widening tax base and increased revenue to the centre and State.
  • Reduces administrative cost for the Government

Now we will look at recommendations of the Working group
Recommendations of Joint Working Group

  • JWG has recommended a dual GST. It means that there will be Central GST to be administered by the Central Government and at the same time there will be State GST to be administered by the State Government .
  • Central GST will replace existing Cenvat and Service Tax and the State GST will replace State VAT
  • Central GST should subsume following Indirect Taxes on supplies of goods and services:-
  • Central excise duties and additional excise duties levied on pan masala, petroleum and tobacco products and those levied under Additional Duties of Excise (Goods of special importance) Act, 1957.
  • Additional Custom duties in the nature of countervailing duties
  • CVD and other domestic taxes impose on imports to achieve a level playing field between domestic and imported goods which are currently classified as customs duties
  • Cesses levied by the Union viz, cess on manufactured bidis, rubber, tea, coffee and cess on unmanufactured tobaccos.
  • Surcharges levied by the Union viz., National Calamity contingent duty, education cess, special additional duties on excise on motor spirit and hig speed diesel (HSD)
  • State GST should subsume following State taxes:-
    • Purchase tax
    • State Excise duty
    • Entertainment Tax
    • Luxury Tax
    • Octroi
    • Entry tax in lieu of Octroi
    • Taxes on Lottery, betting and gambling
    • Tax on consumption or sale of electricity
  • The proposed GST should have two components – Central Gst and State GST – the rates of which will be prescribed separately keeping in view the revenue considerations, total tax burden and the acceptability of the tax.
  • More than 40 services are identified on which service tax should be levied /collected by States.
  • For the purpose of assessment and administration of different assesses following categorisation has been recommended:-
  • Gross turnover of goods up to Rs.1.5 Crore should be assigned exclusively to the State;
  • Gross turnover of Services up to Rs. 1.5 Crore should be assigned exclusively to the Centre; and
  • Gross turnover of above Rs.1.5 Crore should be assigned to both the Governments – for the administration of CGST to the centre and for the administration of SGCT  to the State
  • Exports should be Zero-rated and should be relieved of all embedded taxes and levies at both Central and State level
  • The JWG has also proposed list for exempted goods which includes items such as life saving drugs, fertilizers, agricultural implements, books and several food items.

Expectation from forthcoming GST
We have just now studied above as to what ideal GST means. Going by global experience, GST can be a big boon, if it has right kind of rate and legislation. Coming GST should fulfil expectations of different segment of society in particular the expectations of trade and Industry. Le us examine these expectations:

  1. Expectations from the Central & State Government – Preparations by both Government of GST
  • Centre State interaction

Considering the federal nature of our country and Centre State relationships, Central Government should be prepared to pass more powers of taxation to State and share more revenue with the States if GST has to be successful.

  • Constitutional amendments

Under the scheme of our constitution no tax can be levied without the authority of law. Power to levy tax on goods and services are vested with both Central Government and State Government under Article 246 and List –I and List-II of the VII Schedule of the Constitution. Neither the Central Government nor the State Government can usurp the powers of the others without amending several provisions of the Constitution. Following articles need to be amended by the central Government.

    • Article 246- relating to subject matter of laws made by Parliament and by the legislature of the State.
    • Article 269 – relating to taxes levied and collected by the Union but assigned to the State.
    • Article 270 – relating to taxes levied and distributed between the Union and the States.
    • Article 286 – relating to restrictions as to imposition of tax on the sale or purchase of goods.
    • List I & II of the VII Schedule of the Constitution – some of the important entries.
    • Article 366 – important definitions.

(c ) Re-engineering of Central & State employees-
                 There should be a thorough re-engineering of the department of GST at Central level as well as State level. This is very much required to clearly define, understand and administer functions in such a way that the responsibility, accountability and authority of each tax department at the Central and State level are clearly understood.

   (d)    Single authority to deal with
                 As it is known that  number of official at Central level is less as compared to State level officials it is expected that Central officials be assigned special task to monitor the operations of large dealers (who have pan India operations) under CGST and SGST. The day-to-day operations related to registration, payment of tax and submission of returns for all the dealers (irrespective of their size) should be assigned to the State.
            The assessees with specific turnover, say, up to Rs.500 crore and the assessees whose operations are limited to one State only should be assessed by State Department for both CGST and SGST. In general, the idea is that assessees should interact with one tax authority only.

            Presently, under the recommendation of JWG, CGST will be monitored by the Central Government and SGST will be monitored by the State Government. It means that the assesees will have to deal with two authorities which may be unacceptable by all dealers. Because from the past practical experience, everyone knows that interpretations, procedures, whims and approach widely differ at both levels.

            The above concept will be discussed further while understanding about expected model of GST.

(e)       Tax Payment
 
            Payment of CGST should be made in the bank accounts of Central Government. Similarly payment of SGST should be made in the bank accounts of State Government.

(f)        Verification Agency.
           
             Cross verification of documents should be strengthened under GST to avoid evasion and wrong claims. In France, the Government has created organisation called “National Directorate of Verification” which verifies transactions above 300 million Francs involving  national and international  dealings. Similarly, there is Regional Directorate of   Verification which verifies similar transactions within the districts / divisions. Similar arrangements should be made under our GST regime also.

(g)       MIS amongst different Government Departments.
           
            MIS has to be an integrated  activity of the SGST and CGST offices as well as other Government Departments. The integration of activities of SGST, CGST, customs and income tax through PAN numbers, TINXYS should be  an essential part of GST regime.

(h)       Creation of IT infrastructure –GST Public Services Offices(PSO)

            Cross verification, MIS and interaction between different department and dealers necessitate complete computerisation of all Government departments in all States and as well as availability of computer facility    with each and every dealer covered under GST. Even today it is observed that computers and Internet facilities are not easily available     in villages and towns. Lack of knowledge of computer in such areas is a  hard reality. Therefore, there is a need to bring the awareness about the computer amongst the dealers across India. In the initial period of five years opening of Government sponsored kiosks at various centres facilitating compliance of law through Internet and computers should be seriously considered. In fact, we are reminded of Mr. Sam Pitroda who created the Centre for Development of Telematics (CDOT), an autonomous telecom R&D organisation which made yellow signed Public Call Offices (PCO) ubiquitous throughout India. In the same fashion we highly expect that GST PSO (Public Service Offices) should be created in every village in the form of computer kiosks.

(i)        Training of Staff

            Today excise and service tax staff do not very conversant  about VAT provisions. Similarly, State employees administering VAT Act do not know excise and service tax provisions. Thus both Central and State staff will require learning and training in the administration of GST Act.

(j)        Stability of GST Act rates

            As recommended by Dr. Kelkar, there should be an agreement between Central Government and all State Governments that there should not be any change in the GST Act or rates without concurrence of both Central and State Governments. This only can lead to stability of GST Act.

B.        Expectation from the GST Act.

            (a)       Present lacuna to be removed

Finance Ministers of all State are jubilant because of the buoyancy in the collection of VAT revenue and feel that by the large harmonisation has been achieved in the VAT laws throughout the country with deviation in rates being less than 3% of the cases. However, we all know that everything is not right as far as dealers are concerned. Following lacuna found in the present VAT laws should be removed from the GST Act.

             (i) Today we are finding separate VAT laws in all States. There should be one GST Act applicable to whole of India.
                       
             (ii) The description of entries prescribing rate of tax is not uniform in present VAT laws which results into same commodities being taxed differently in different States. Under GST there should be common schedules applicable in all States

             (iii) (a)  Input tax credit is not given of the tax paid on each and every goods used in business. Different States follow different rules  in granting tax credit. Under the GST Act, it is expected that all the tax paid on all inputs should be available for adjustment against output tax. This only  can bring removal of cascading effect and one price pan India making entire India one national market.

                  (b)  If dual GST is introduced, i.e. CGST at Central level and SGST at State level, it is proposed that input tax credit  for CGST will be given only against the payment of CGST. Similarly, input tax credit of CGST will be given only against the payment of SGST. In other words, if there is a balance input tax credit available in either of the GSTs, it cannot be adjusted interchangeably, i.e. input tax credit of CGST cannot be adjusted against payment of SGST. This is not acceptable to trade and industries. Input tax credit of one GST should be allowed to be adjusted against other GST if balance is available.

(iv)  The procedural provisions relating to:-

  • Granting of registrations
  • Preparation of bills
  • Filing of returns
  • Scrutiny of returns
  • Assessments
  • Granting of refund
  • Audit
  • Cross-verification
  • Appeal
  • Allowance of credit notes etc.

      are different in different States. Under GST Act, same procedural rules should be prescribed for all States.

(v)  It is highly expected that all steps are taken to ensure that no pending work relating to either sales tax, VAT or other indirect taxes remains outstanding before implementation of GST so that everybody can concentrate on the new laws. It is therefore, suggested that some schemes for summary disposal for all the pending cases should be pronounced before GST comes into operations.

b)        GST Rate

i) Fixation of revenue neutral rate The Success of GST will largely depend on the determination of ideal rate at Central level as well as State level which should be acceptable by public and revenue neutral to Government.

The golden rule for collection of tax is given by world’s oldest economist Kautilya alias Chanakya  Muni more than 1000 yeas ago. He said that the king should collect           tax from different persons as the bumble bee collects honey from different flowers without making any harm to them.  Thus all efforts should be made to keep the GST rate as low as possible.

  • The standard rate of 16% adopted for CENVAT (now first  lowered to 14% then 12% and then 8% under various schemes), along with the residuary rate of VAT 12% beings the overall rate to 28.5%, which is too high a rate compared globally. Some of the global rates of GST as given below will be really an eye opener.
  • Taiwan/Japan-5%
  • European Union (EU)- 19.5%(average)
  • Organisation for Economic Co-operation and Development (OECD) counties -17.7%.
  • Asia Pacific countries-10.8%
  • South American countries-14.2%
  • Mexico – 15%
  • Australia-10%
  • Canada -6%
  • Hong Kong /Bahrain-Nil

Ideally, GST rate  may be kept at about 18% considering the fact that now CGST will also be available on value added transactions which will enhance Government revenue to a large extent.

(ii)  No SGST on CGST

As per legal position today, sales tax / VAT are charged on excise duty element also. Under the new system, excise duty, i.e. CGST will be levied on each value added transactions up to consumers. It means that, SGST will further increase on such element with each value added transaction. For example, if CGST is 10% and SGST is also 10%, with each value added transaction, there will be additional burden of 1% of SGST (10% SGST on 10% CGST). Ultimately, there will be a heavy burden on consumers. Hence, it is recommended that no SGST should be levied on any CGST element.

(c)  Interstate transactions

It is presumed that Central Sales Tax will be phased out with the introduction of GST, but issue of GST on interstate transactions will be there. Proper mechanism needs to be introduced so that dealers get input credits for any GST levied on interstate transactions. Only this can avoid cascading effect in the real sense.

             (d)      GST model

                        There are four alternatives in this context:

  • GST at Central Government Level  (Option I)
  • GST at State Government Level (Option II)
  • GST at both, Central and State Government Levies (Option III)
  • On GST with allocation of dealers between Central and State (Option IV)

Canada has GST at Central level extending  to all goods and services covering all stage of value addition. In addition, there is tax at province (state) level in different forms which include VAT, Retail Sales tax and so on. European Union(EU) nations (each one is independent nation but, part of a Union and have agreed to adopt common principles for taxation of goods  and services) have adopted  “classic” VAT. If we consider EU as a country equivalent and member nations as state equivalent , EU has only State Level VAT with special rules for intra-community (inter-member state) transactions.

In Indian context, an additional dimension is added by the provisions of Constitution which specifically reserve power to impose tax on specific activities to specific level of government e.g. tax on import of goods can be imposed by Union government only whereas tax on sale of goods involving movement of goods within the state can be imposed by the State Governments only.

Presently, option III is being, recommended by JWG.

However, the experts’ expectation is Option IV, which will have following salient features:-

  • Instead of there being Central GST and State GST, there will one GST Act.
  • Administration and assessment is explained in detail in para A(d) above under the title “Single authority to deal with”  The advantage  of such arrangement has also been given.
  • It will be easy to operate, interpret and monitor one Act to the Advantage of both Government as well as dealers.

                        (e)       Motor Spirits, Naphtha & Natural Gas

It is recommended by JWG that no ITC will be available on purchase of petrol and diesel although sales tax rates on these products are as high as 26% (& 25%) on petrol and 28% (& 26%) on diesel in Maharashtra, 23% on petrol and 21% on diesel in Gujarat. In almost all States rates are very high and no ITC is available. For Trade and Industries if cost sheet is prepared for any product fuel and transportation cost direct and indirect costs will definitely form about 20% of the total cost. Trade and Industries strongly expect that rates should be rationalised or  input tax credit should be made available to avoid unnecessary burden to final consumers.

Similarly, on naphtha also there is high rate e.g. in Maharashtra -12.5%(with reduced input tax credit) and in Gujarat-16% + 2.5% = 18.5% (with no input tax credit), if used as fuel. If used as raw material, input tax credit is available but there will be accumulation of refund as end products are mostly taxable at 4%. Thus it is highly expected that rate of tax should be reduced to 4%.

Similarly, natural gas is taxable at 12.5% with the same issues as given in the case of naphtha. Hence, its rate should also be reduced to 4%.

If we look globally, in Australia GST rate is 10% on petroleum products and natural gas with availability of input tax credit when used for business operations.

In Canada, GST rate is 6% federal + 14% provincial with availability of input tax credit when used for business operations.

In Singapore, rate is 7% with availability of input tax credit when used for business operations.

In Sri Lanka, rate is 15% for petrol and input tax credit  is available when used for business operations, Surprisingly diesel, kerosene, LPG, Crude oil, ATF etc. are all exempt.

Thus it is believed that in India high rates of tax on petroleum products is one of the reasons for high cost of final product which is to be borne by common man i.e.    consumers.

It is possible to reduce rates and provide ITC under the GST regime because State Governments are going to get additional income by way of service tax which will duly compensate loss of revenue on petroleum products. Hence, Trade and Industry expect that rate on petroleum products must be rationalised and input tax credit must be made available.

c.         Expectations from Chartered Accountants

Introduction of GST is going to open up an entire new field of practice for all chartered accountants. Today, for expert advice on excise and service tax industry has to go to different experts and for VAT to different experts. When all Acts are going to be merged in one, it is high time that all chartered accountants also took up study of VAT, excise and service tax and become GST expert. Many Governments have opened single window where all queries pertaining to development of Trade and          Industries are answered. Similarly, if we have no single window, i.e. one GST expert answering all the queries, Trade and Industries will be very happy to take their services. Thus all chartered accountants also need to prepare for GST practice.

            Preparation of GST

  • Central & State Government  should be prepared to fulfil the expectations of Trade and Industries as listed above.
  • Even Trade and Industry need to prepare as they will have to reallocate and rearrange following activities.

(i) If separate departments are existing in the companies to monitor excise, service tax and VAT, they will have to be merged in an amicable manner.
(ii) Record keeping will have to be changed and IT software will have to be updated in order to comply with GST provisions.
(iii) Teachings and training will be required at all levels.
(iv) Trade and Industries will have to rethink about their  market strategies, stock transfer policies and godown keeping policies in different States depending on GST provisions.

Global Experience
Globally GST is not a new concept. Today it is in operation in more than 150 countries. Brazil introduced federal VAT replacing wholesale tax and the State VAT replacing, the State turnover tax in 1967. The tax base for the federal VAT is industrial production. The tax for the State VAT includes all goods with the exception of some industrial products, imports, agricultural inputs, food products and services. Agriculture, minerals and services are excluded from tax.

Mexico implemented VAT regime in 1980 to replace 30 federal excise taxes and 400 municipal and state taxes. The tax base covers businesses  connected with the sale of goods and services. Mexico has uniform VAT rate and bases across the States and it follows the destination principle. The tax may be regarded as a unified national VAT with revenue sharing.

The European Union (EU) has fully harmonised  VAT since 1993. Initially, it was achieved through the “approximation” of rates i.e. by fixing a specified range within which VAT rates could vary.

Dr. Vijay Kelkar’s Views on GST

It is worth quoting some of the views of the chairman of 13th Finance Commission. Dr. Vijay Kelkar who has always pitched for he introduction of GST, He elaborates that:

  • A well designed destination-based GST on all goods and services should be the most elegant method of eliminating distortions and taxing consumption.
  • Under this structure, all different stages of production and distribution should be interpreted as a mere tax pass-through, and the tax essentially `sticks’ on the final consumption within the taxing jurisdiction.
  • The introduction of GST should also bring about a macroeconomic dividend, as it reduces the overall incidence of indirect taxation and therefore, the overall tax burden by removing many adverse features of the present sales tax system.
  • The effective revenue neutral rate at which GST can be implemented should be far lower than 30% indicating a significant reduction in the effective tax burden on our economic agents.
  • The comprehensive GST should fully eliminate the export of taxes and improve international competition. This in turn, should help in increasing the production and exports of labour intensive manufacturers and also, boost employment in our  economy.
  • Considering the high level of distortions in the indirect tax system, one can argue that the real output effect of a well implemented GST in India would be at least 1.4%  of the GDP in Canada. This amounts  to $ 15 billion annually, implying that the economic value of GST reforms would, at a modest 3% discount rate, be close to half a trillion dollars or 50% of the country’s present GSP;
  • More importantly, this means  potentially creating an additional productive employment for as many as 4 to 5 million. The introduction of GST would also be a reform measure whose economic impact will rival that of the elimination of licensing in 1991.
  • The existing tax system introduces myriad distortions which favour some goods and services at the expense of others. Such distortions in our tax system are also adversely affecting the growth for manufacturers, particularly labour intensive manufacturers, who are extremely important  in meeting the challenge of providing productive employment. This should be achieved by the introduction of GST.

It is also worth quoting his views and concerns relating to GST expressed at the speech delivered by him recently at ASSOCHAM 3rd National Conference on “GST for Accelerated Economic Growth and Competitiveness”.

While discussing on design issues, on the issue of rate structure and value he said: “The primary concern of all State Governments is protection as well as enhancement of existing  revenue streams. There are three parameters which need to be balanced here – one is the rage of taxes presently being levied which will be subsumed into the GST. This will determine the tax base of the GST. The other two  parameters are the number of rates and the numerical value of these rates which will be applied to this base”.

On interstate sales and Central Sales Tax(CST) he has said.

“While CST will be abolished in the GST regime, the treatment of interstate sales will need to be carefully thought through. It would be necessary to guard against tax   arbitrage where local sales which will be taxed could be shown as interstate sales”.

While deliberating on operational issues he has advised all States and Centre to have a common approach relating to legislation, various assessment  procedures, exemptions, thresholds and composition.

To avoid any tax evasion under GST regime, he has emphasised on sharing of information amongst Centre and States, introduction of practical IT infrastructure, continuation of check-post for some more time.

He has also suggested two more sectors to be included under the GST regime which are not part of the present discussion on the GST configuration – first is taxation of real estate sector (this issue was raised in 2003 FRBM Task Force report) and second is taxation is rail sector. He wants to include these two sectors in the GST tax base either immediately or during the subsequent phase. This is highly a debatable issue itself having lot of pros and cons for the same.

Conclusion
In the end, I will conclude that if coming GST will fulfil our expectations as listed above it will turn out to be good and serving tax.

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