Goods and Service Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 17-2-2010 Last Replied Date:- 30-12-1899 – Macro Economic Backdrop Indian economy is pegged to grow at close to 7 percent in current fiscal, belying pessimism that the economy would grow at a lower pace due to global economic slowdown. There are also evidences that the industrial sector is reviving now, However, according to IMF, growth in the Indian economy is likely to pick up from 6.75% in 2009-10 to 8% in 2010-11. Also services sector, more particularly, banking, financial services, insurance and information technology are expected to grow in double digits. In the recent Reserve Bank's credit policy review, the central bank has given a clear message for fiscal consolidation and signaling an end to the expansionary policy stance. This appears to be in sync with improved global outlook, optimistic growth prospects and fear of inflationary expectations. So far as fiscal deficit is concerned, it could be reduced to 5
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ral feeling is that in the wake of proposed GST by 2011, the government may not propose major changes in excise and service tax arena, a school of thought is of the view that. 2010 budget will be the last opportunity to align existing rates to the proposed GST rates and also levy service tax on more services so that preparatory exercise is done and date bank created. Thus, extending the service tax to all services and having a common threshold limit match with that proposed in GST may be attempted. A common rate may also be explored. 2010 also presents the opportune time for introducing a negative list of taxable services and taxing services comprehensively. What would be more desirable is to identify all such services and atleast remove the overlaps between existing services. However, with GST just a year away, will it serve any tangible objective will have to be deliberated. Taking opportunity of the Budget 2010, Finance Minister ought to make certain bold and straight forward statem
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emptions. The payment and compliance becomes flawless through input tax credit mechanism thus, making goods and services competitive resulting in economic value added. There however, exists a set of differences between the centre and the states and states inter se on various issues concerning GST. Our country needs to adopt a balanced approach and a concerted effort to maximize taxes under GST across almost all goods and services so that industry is benefited in terms of lower cost of compliance. Not only this, GST will benefit the industry in terms of increased output and productivity and even improve the GDP by over one percent. GST should also spur higher tax compliance leading to lower tax rates. So far as GST exemptions are concerned, they should be decided judiciously rather than on arbitrary basis or on political compulsions. GST to be economically successful should also be backed by efficient tax administration and machinery. For this grass root level is most crucial which must
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common date. Appropriate amendments in the Constitution should be carried out without any further delay. The Government should also ensure that the definitions provided under the Centre as well as the State enactments should be uniform, unambiguous, simple and in harmony with other existing laws. As far as possible, artificial deeming fiction in the definitions should be avoided. It is also necessary that classification of goods and services is based on international norms to avoid all classification disputes. Service Tax On service tax front, following suggestions can be attempted keeping in mind that GST is still away, atleast for a year – Wherever assessees or trade associations or chambers seek clarification from the board, a time limit of say, 30 to 60 days be set so that board is bound to clarify the issues raised within such time fame. There have been instances where clarifications have come after a gap of as long as 2 to 3 years and in some cases, clarification is due. Like sma
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ce Tax should be paid under one code, ie, assessee's code and not the service code. This will simplify the procedure without any loss of revenue. On valuation of services, all reimbursements of expenses should be kept out of tax net and the definition of pure agent should be amended accordingly. Export and import of service needs to be redefined in a much simpler manner so that assessees comply with the law and litigation is reduced. Refund of service tax on input services to exporters is still a tedious process and despite of CBEC's clarifications, the field is not forthcoming with the hassle free refund process. The exporters are made to run from pillar to post for claiming refund at field level or at first appeal stage. The budget should seriously address this issue and help exporters and others to avail the benefit which is in line with the legislative intention as well as rules. Also, the simplified refund procedure should cover all service tax assessees. There have been l
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