Goods and Services Tax – GST – By: – Dr. Sanjiv Agarwal – Dated:- 4-2-2016 – Disadvantages / Possible Distortions of Implementation of GST Proposed GST is not a national unitary / centralized tax but a tax to be levied by both, states and the union simultaneously. In GST proposed GST- (a) There is a retrograde move to extend GST to stock transfer by first charging on it and then giving credit. The states have forced their way in this decision which will cause a lot of impairment in work against the wishes of the Centre. It will involve tremendous work with no revenue gain. Even if certain amounts are given credit after initial payment of duty, the money has to be brought out from other circulations and to that extent the economy will become slower. (b) On import, a countervailing (CV) duty of 27 per cent, which is said to be revenue neutral rate for IGST, is to be paid which is substantially higher than before. Earlier, service tax was not to be included in CV duty, but now that also
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as basic food items, exports and some health services. Incorrectly claiming the full amount of GST credits on entertainment expenses where the business has elected for fringe benefits tax purposes to use the 50/50 split method, in which case only 50% of the input tax credits can be claimed. Claiming the entire GST credits on a car purchased for more than the luxury car limit. Sole traders and partnerships are not apportioning input tax credits and making adjustments to expenditure that's partly private and partly business use. Incorrectly claiming an upfront GST credit on assets financed through a commercial hire purchase (CHP).While an up-front GST credit is available for businesses accounting for GST using the accruals or invoice basis, Incorrectly claiming GST credits on payments for Yellow Pages advertising. If the business chooses to pay for the cost of advertising by installments. Claiming a GST credit when the business does not have a valid tax invoice at the time of lodgin
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uding that on exports Expanding service tax to almost all services Common/unified tax rate for goods and services which may be ideally, revenue neutral (a suitable GST rate) Avoiding or minimizing differential tax rates Abolition of other small taxes Abolition of CST in a phased manner Power to levy service tax on select/agreed services to States Issue of inter-State services and goods movement vis-a-vis levy of duty or tax to be sorted out Revenue sharing mechanism to be rationalized Centre should be enabled to tax value added upto retail stage. While GST may be seen as national VAT system on goods and services, states sales tax shall eventually cover all states to have state level VAT system for sales etc. GST, if implemented, would end up prevailing distortions in goods and services taxation in term of money and scope. It will also result in lowering of cost of compliance, enhancing compliance levels and result in higher tax collections. It would offer a wider tax base and reduce re
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