MONEY
In its first meeting after the passage of the Constitution Amendment Bill for Goods and Services Tax (GST), the Empowered Committee of State Finance Ministers met industry and trade representatives and chartered accountants on Tuesday to address their concerns regarding the proposed reform. While industry pitched for a standard GST rate near 18 per cent, state finance ministers asked them if they will pass on the benefit of the lower tax rates to consumers.
“The committee is taking (feedback) in an open and transparent manner … Many points were made looking at GST from the other side — those who would be paying taxes — as against the government which would be collecting taxes,” the committee’s chairman Amit Mitra said after the meeting.
Industry representatives said that a reasonable rate will generate adequate tax buoyancy without having an inflationary impact. CII President Naushad Forbes said, “We believe a maximum rate of 18 per cent as the standard rate will be revenue neutral and ensure adequate tax buoyancy. Also, the Centre has agreed to a full five-year compensation for revenue loss to states. So, 18 per cent rate will be more than adequate.”
FICCI said the standard rate should be “reasonable” and one that checks inflation, evasion and ensures compliance. “Goods fully exempted from the levy of excise duty and VAT by all the states should be categorised as exempted goods in the GST regime as well,” it suggested to the committee.
State finance ministers, however, raised apprehensions over industry passing on the benefits of lower tax rates to consumers. The effective rate for industry is hovering around 30 per cent currently, which is likely to come down to 18 per cent, so we asked the industry whether they will pass on the benefit to consumers, Kerala’s finance minister Thomas Isaac said, adding that industry only cited competition to ensure the pass-through of benefits to consumers.
Among other suggestions made, e-commerce firms sought exclusion from the new regime, along with demanding relaxation in penal provisions. Many industry players admitted that April 1, 2017 deadline will be tough to meet as sufficient time is needed to put in place the IT infrastructure required, but Forbes said CII will do “everything to ensure we stick to the deadline”.
Industry representatives also raised the issue of single, centralised registration of service providers operating in different states in lieu of multiple state-wise registrations in the meeting. “The states recognised very much that certain services like telecom come under the central scheme. Under the current draft, you would need to register in each state which would make it very very cumbersome,” Forbes said, adding that the states were very receptive to the idea.
Mitra, however, questioned the billion dollar valuations of the online platforms, to which the the e-retailers said that their source of revenue is advertisements on which they pay service tax. According to Mitra, consumers buying products online pay VAT, producer pays excise duty but these companies go untaxed on the pretext that the transaction is just a pass-through. “E-commerce brings in competition, but you are also adding some value. Else how are your companies generating so much valuation?” Mitra said.
‘GST implementation needs to be smooth’
Google's Southeast Asia and India VP Rajan Anandan has said that a seamless implementation of the GST is important for small internet firms and that the tech giant along with others was working with the government on the same. “Google is a large company… but for an early stage company, you can see how it can get complicated to register in each and every state. We are not seeking exemption, but we are trying to see with the finance ministry how we can make things seamless,” he said