MODEL GST LAW : REFINEMENT REQUIRED
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 8-9-2016
The model GST law as released by the Government / Empowered Committee on GST is in public domain since mid June 2016. The proposed provisions only conveys the Government's intention to levy GST in India and the manner in which it will be administered, levied , collected and implemented .
However, the said proposed provisions require refinement, improvement and changes in order to be business friendly and lead to ease of doing business, boost economic growth, tax collection and balancing between inflation, revenue neutrality and participation of citizens by way of contribution to the exchequer in the form of goods and service tax.
It is desirable and expected that the draftsmen should consider the following suggestions and inputs while finalizing the model law in its present form .
Specific Suggestions
* Multiple state wise registrations will be a major hurdl
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ion of aggregate turnover be suitably amended so as to exclude the value of exempt and non-taxable supplies from aggregate turnover to make it meaningful and objective. Otherwise the purpose of exemption / threshold will be defeated.
* Definition of supply should be 'comprehensive' and not inclusive. It is defined as 'supply includes' rather than supply means….'. This will add to litigation. The supply of capital goods (whether to own depot or to the customer) be kept outside the purview of GST , and only the leasing / renting / transfer of right to use the asset be subject to tax.
* Inter-state activities should exclude activities of same person. These activities are unnecessary under the GST law, unworkable and will be tantamount to creating inter-state fiscal frontiers, impeding free flow of goods and / services within the common market of India.
* The definition of manufacturer should be delinked from Central Excise Act and an elaborate definition of the
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erstate supply of goods and / or services shall work against the interest of small assessees as there might be a possibility that in aggregate turnover of ₹ 50 lakhs only a small amount constitute inter-state supply of goods or services which will deny him of the benefit of composition scheme.
* Valuation rules are too cumbersome so as to even prescribe valuation of services without consideration.
* Transaction value of goods and services should factor the 'discounts'. There should be no tax on free supplies.
* In GST system, it is expected that the figures submitted for GST returns will be validated with figures submitted to Income tax. Given the fact that the sale and provision of services is one of the factors for charging of tax, the taxable figures in GST will be far different than figures in accounts or in income tax. A system needs to be built so that the figures in other data base could be used for validation of figures in GST.
* The concept of granti
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refund / adjustment procedure for such cases be made fast-tracked, simple and quick.
* Government should not hurry implementation of GST from April, 2017. There is lot of ground work to be done. The most important is awareness, education, training and trial runs. 1st April 2017 is not that sacrosanct but introduction of a perfect law at the right time is more important. Country can wait for a strong and robust GST law for some more time.
General suggestions
* It should be ensured that all states have verbatim same provisions for rates, levy, administration and procedures. Only negative list or exemptions may vary based on regional issues.
* A large number of compliances / returns / reconciliations are proposed. This will only burden all stakeholders; will make GST inefficient and a regressive tax. Cost of compliance will be major issue which may take away the benefits of GST.
* Smooth, transparent and simple transition provisions are needed rather than revenue centric provisi
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to be diluted in view of GST being a new levy and new law. Prosecution threshold should be kept at ₹ 2 crores as minimum. There should be a provision that except in fraudulent cases, no arrest / prosecution be made in first year of implementation.
* No new taxes should be allowed to be levied by states in GST regime when compensation for revenue loss, if any is guaranteed.
* GST is the future tax. GST law should, therefore be forward looking and open for futuristic businesses such as e-commerce, technology based, IT etc and recognize internet, digital economy, start ups etc.
GST law should be a very simple tax law as the proposed law / provisions are too complex to understand by a common man.
Reply By Ganeshan Kalyani as =
Sir, nice article and very valid suggestions. The conplaince part is really going to take time and manpower and cost. Secondly the matching concept for being eligible for availing credit is very tedious and are going to invite problems. Registration in
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