TIOL-DDT 2903
04 08 2016
Thursday

THE Finance Minister in his 2006 Budget Speech said,

There is a large consensus that the country should move towards a national level Goods and Services Tax (GST) that should be shared between the Centre and the States. I propose that we set April 1, 2010 as the date for introducing GST. World over, goods and services attract the same rate of tax. That is the foundation of a GST. People must get used to the idea of a GST. 

More than ten years later, the Rajya Sabha yesterday passed the much hyped GST Bill. Actual implementation of GST is still far away.

9 Things to do before GST can actually take off.

1. Pass the bill in at least 15 States.

2. Form the GST Council

3. Decide the tax rate and threshold limit and draft/approve the GST legislation.

4. Get the CGST Bill passed in Parliament and the SGST Bill passed in all the States

5. Put in place a proper adjudication and appellate mechanism.

6. Launch a powerful fully tested IT system (GST NET) with all the States linked properly.

7. Launch a user-friendly web site.

8. Train the huge army of Central Excise and Commercial taxes employees to understand the tax and adapt to its concepts.

9. Constitute a high power monitoring and implementation wing to clarify doubts, assist the taxpayers and deal with litigation on the validity of the legislations and other taxing issues.

And certainly, this cannot happen before April 1 2017. 2018 may be too dangerous electorally for any political party to introduce GST. 2019 could be the nearest possible year.

GST Bill is Through - Remember Canada…

THE passing of the GST Bill is hailed as a historic event in the tax history of the country. A Member in the Rajya Sabha assured the Government that in several countries, the Governments that introduced GST returned to power.

But Mr. Sitaram Yechury cited a different story. Mr. Mulroney of the Progressive Conservative in 1991, who had a two-third majority, brought the GST Bill in Canada. Two years later, elections took place in Canada and from a two-third majority, the Party's strength came down to two representatives!

Moral of the story: Never take the risk of GST two years before elections.

GST Bill - Clumsy Drafting?

THE Finance Minister who made a reference to GST for the first time in Parliament was P. Chidambaram in 2006.

Chidambaram was in Rajya Sabha yesterday, speaking on the GST Bill. Finance Minister Arun Jaitley said it was a luxury now to be a former finance minister.

Mr. Chidambaram said that there are exquisite pieces of clumsy drafting in the Bill. He said,

"I wish to point out to the hon. Finance Minister, that there are still pieces of clumsy drafting in this Bill. For example, in the present List of Amendments circulated, you have made some provisions for what will go into the Consolidated Fund of India and what will not go into the Consolidated Fund of India. This problem should have been noticed much earlier. It should have come in the Draft Bill. But it has come today in the form of an amendment, and while I will not take too much time explaining what I have in mind, if the hon. Finance Minister reads it more carefully, he will find that these are exquisite pieces of clumsy drafting. Revenue has to go into a Consolidated Fund. That is the mandate of Article 266 of the Constitution. It has to either go into the Consolidated Fund of India or the Consolidated Fund of a State. It cannot go nowhere, and I am afraid the draft amendment circulated leaves this question unanswered. I can understand the problem that you faced. I think, to the best of my understanding, the problem was how to avoid double-counting. But I think there was a more elegant way of dealing with the problem of double counting. I think the draft is clumsy. Maybe, it can't be rectified at this stage when we are in the final stages of debating the Bill. But I would just add a word of caution that the drafting in this respect is rather clumsy."

Dispute Resolution: Now, please remember that dispute resolution between the Centre and States, between one State and one or more States, between a group of States and a group of States, is not a matter on which the Constitution is silent. Whatever we do here, we must acknowledge the fact that the Constitution is not silent on dispute resolution between States. Article 131 speaks loud and clear. It provides for a machinery for dispute resolution. Nothing that we do here can derogate from Article 131 unless you amend Article 131, and that is not what we are doing today, which is why the Bill introduced by Mr. Mukherjee in 2011, laid out a clear provision for dispute resolution called the Dispute Resolution Authority, and recognized that dispute resolution is an exercise of judicial power. Just as the Government is jealous of guarding its Executive power, just as we in Parliament are jealous of guarding our Legislative power, the judges of this country are jealous about guarding their Judicial power. Time and again, the judges have said, if you encroach upon our judicial power, we will strike it down. I still maintain that the provision introduced in Mr. Mukherjee's Bill was the best provision, or clearly a much better provision than the provision introduced in the present Bill. The draft circulated was abominably deficient. It did not even require the GST Council to establish a mechanism. It says 'may lay down the modalities', and in discussions with us, and I believe, discussions with other parties, it was pointed out to the Government that this is hopelessly deficient. You must oblige the GST Council to set up a Dispute Resolution Authority, and it must be set up ex ante. A mechanism cannot be set up after the dispute arises; that is the difference between rule of law and rule by law.

Rule of Law: In a country governed by rule of law, the Dispute Resolution Authority is known to everybody even before a dispute arises so that you know if a dispute arises; you go there. If you set up the machinery after the dispute, that is not rule of law. That is, show me the person and I will show you the rule.

Tax Rate: The heart of this Bill is what the tax will be. It is not a matter between the Union Finance Minister and the State Finance Ministers. There is a third line to the triangle; that is the people of this country. Every Union Finance Minister wants to maximize revenues. Every State Finance Minister is under pressure to maximize revenues. There is nothing wrong with that. But, please remember we are dealing with an indirect tax. An indirect tax, by definition, is a regressive tax. Any indirect tax falls equally on the rich and poor. If you buy a soft drink bottle; whether a rich buys it or a poor man buys it, he pays the same excise duty on the soft drink bottle. That is why, world over, indirect taxes, being regressive in nature, the trend is to keep them as low as possible.

Cap the tax rate: Now, when we say, 'cap the tax rate', what are we saying? We are saying that this rate should not be changed by the whim of the Executive. Today Excise Duties are changed by the whim of the Executive. Three days ago, they reduced the price of petrol and diesel. Three days later, they increased the price of petrol and diesel. They do not come to Parliament for approval. The Customs Duties are changed by the whim of the Executive. But the Income-tax cannot be changed by the whim of the Executive because it is enshrined in the law. Therefore, we argued, please now, on the basis of your own reports, cap the rate. When we used the word 'cap the rate', what do we mean? It cannot be changed by the whim of the Executive. A rate must only be changed with the approval of Parliament.

The people of India expect low Indirect Taxes.: There are a lot of people, a lot of corporates, I have seen in the last few days, speak up of passing the GST Bill. It does not matter to them whether the rate is 18 or 20; they will pass it on to the consumer. Anyway, there are many voices in the country to speak up for the corporate supporters. But, somebody must speak up for the people. That is precisely what my party is doing, what I am doing today. In the name of the people, I ask you to keep this rate at the rate recommended by your CEA, namely, the standard rate should not exceed 18 per cent. I know, you are not incorporating it in the Constitution Amendment Bill. But, willy-nilly, you have to incorporate it in the GST Bill. No tax Bill will survive judicial scrutiny unless the tax rate is mentioned. So, today, you may avoid mentioning of it, but three months later, when you come back with the GST Bill, the CGST Bill and the IGST--now called Goods and Services Tax on Inter-State Trade and Commerce--must mention a tax rate. And we will repeat this demand again then. In the meanwhile, we will campaign throughout the country appealing to the people of India to support the idea that this tax, the standard rate of GST, should not exceed 18 per cent.

If the Government does not care about inflation, does not care about acceptability to the people of India, does not care about efficiency, then go ahead and charge 24 per cent or charge 26 per cent! That is defeating the purpose of GST. If you are going to charge 24 or 26 per cent ultimately on goods and services, why bring a GST Bill at all? Your Excise and Customs will take care of it.

Taxation is the exclusive power of Parliament. It should remain the exclusive power of Parliament. We can give some flexibility to the Executive, but eventually, it is Parliament which must call the shots on what the rate is. That is why I appeal to you that while today we may not put the rate in the Constitution (Amendment) Bill, tomorrow when the Bill comes, the rate has to be mentioned and we will, in the meanwhile, campaign and persuade all political parties and all sections of the people that a standard rate of 18 per cent is the most acceptable rate, given the economic situation of this country.

Government Issues FAQ on GST

EVEN before the GST Bill was passed in the Rajya Sabha, the Government came out with an FAQ on GST with the very first answer being far from true.

Question 1. What is GST? How does it work?

Answer: GST is one indirect tax for the whole nation, which will make India one unified common market. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

This is a blatant misrepresentation of facts. There will be three GSTs - CGST, SGST and IGST with separate ITC (Input tax credit) accounts.

GST FAQ

Passage of GST - PM Thanks

PRIME Minister Modi tweeted,

"On this truly historic occasion of the passage of the GST Bill in the Rajya Sabha, I thank the leaders and members of all parties.

Our MPs must be congratulated for their path breaking decision to give India an indirect tax system for the 21st century.

We continue to work with all parties and states to introduce a system that benefits all Indians and promotes a vibrant and unified national market.

This reform will promote Make in India, help exports and thus boost employment while providing enhanced revenue.

I would like to add that GST will also be the best example of cooperative federalism. Together we will take India to new heights of progress"

Customs - Exchange Rates - Japanese Yen

GOVERNMENT has revised the exchange rates of Japanese Yen from today.

Notification No105/2016-CUSTOMS (N.T.), Dated: August 03, 2016

Anti-dumping Duty on Polytetrafluoroethylene Extended

THE  anti-dumping duty on 'Polytetrafluoroethylene(PTFE)', falling under Chapter 3904 61 of the First Schedule to the Customs Tariff Act, 1975 originating in, or exported from, People's Republic of China, imposed vide notification No. 81/2011-CUSTOMS, dated the 24th August 2011 is extended till 23rd August 2017.

Notification No 36/2016-Customs (ADD), Dated: August 02, 2016

Until Tomorrow with more DDT

Have a nice day.

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