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GST - A New Look CBEC, sorry, CBIC on the cards

TIOL - COB( WEB) - 549
APRIL 13, 2017

By Shailendra Kumar, Founder Editor

AFTER praising the work done by the Union Finance Minister, Mr Arun Jaitley, in the just-concluded Budget Session, the President of India, Mr Pranab Mukherjee, who was at one point of time in the vanguard of the most historic indirect tax reform, yesterday gave his Presidential assent to the FOUR GST BILLS passed by the Parliament. Thus, all the four Bills stand enacted with effect from April 12, 2017. And the Draft Rules which are being debated by the trade and industry and also the official circles, would soon be vetted and notified by the GST Council. The next big item on the Council's agenda is to vet the recommendations of the Tax Rates Fitment Committee by next month. And the final call would also be taken by May-end or June is going to be about the Date of Implementation - A toss between July 1 or September 1!

In this background where the Central legislations are now in place, and the State Legislatures are gearing up to pass the SGST by April-end or latest my mid-May - of course, before the next Council's meeting next month, the ball is now in the administrative court. The existing CBEC structures and also the State administrative structures are to be re-engineered in a big way. Mr Jaitley has already approved the laboriously-prepared Reorganisation Report of the DGHRD for the CBEC which is going to be renamed as the Central Board of Indirect Tax & Customs (CBIC). Similarly, some of its key arms like the DGCEI and NACEN are also going to be renamed. The DGCEI will become the Directorate General of GST Intelligence with offices in all the States, and the NACEN will be rechristened as the National Academy for Indirect Taxes & Customs with many more regional centers where not only the Central and States officials but also trade and industry persons are going to be trained in the intricacies of the new tax system.

Let me begin with the newly-approved structure of the CBEC which will have a separate GST wing for policy and procedure-related work. There are Six Member posts besides the Chairman. The new charges for the Members will be - Member (GST & CX); Member (IT, Legal & CV), Member (Tax Policy), Member (Investigation); Member (Customs) and Member (Admin & Vigilance). Some of the charges are based on the functional requirement of the new reform and may look like a mirror image of the CBDT. Member (Investigation) will have two Commissioner-level posts - One for the Customs & the second for the GST and Central Excise. The policy wing - TRU-I and TRU-II - will be bundled into just one composite TRU. And the Central Excise along with the Service Tax wing will disappear or merge into the GST Wing.

In this proposal it appears that it was largely a renaming exercise rather than original thoughts going into the restructuring of the Board and the manner in which it works. Taking a few cues from the past the CBEC Board should be completely revamped and if need be, one of the Member posts may be surrendered. For instance, when there is one Member (GST & CX), there is no need for an independent Member (Tax Policy). When the entire GST-related work is going to be done by the GST Council's Secretariat, there is very little work left even for the TRU. If we look at the future of Customs, it is largely going to be a facilitation-oriented wing with more focus on prevention. In this background, one may say that even TRU may disappear in the years to come.

For the field formations, the focus is on a hybrid setup of territorial jurisdictions and functionally-specialised units. One Audit and one Appeal Commissionerate is proposed for every set of two GST Commissionerates. Thus, 49 GST Audit and 50 GST Appeal Commissionerates are also proposed. Additional /Joint Commissioner shall be the final Adjudicating Authority. Commissioner / Additional Commissioner (Appeals) will be the First Appellate Authority based on monetary limits. The second Appeal shall lie in the proposed GST Tribunals and the work related to representation of the Department’s cases in these GST Tribunals would be done by the respective GST Commissionerates by engaging empanelled Counsels for this purpose. The existing office of the CC (AR), CESTAT is proposed to be kept intact for the present.

LTUs are proposed to be guillotined in the current form. However, the Chief Commissioners may declare one GST Commissionerate under their jurisdiction as “Strategic Business Unit (SBU)” to replace existing LTUs. Directorate General of Taxpayers Services will provide taxpayers facilitation and the requisite services to the taxpayers throughout the country. Directorate General of Systems will be the backbone of the new IT-driven tax system. The CBEC would also set up TWO new Directorates - Directorate General of Analytics and Risk Management (DG, ARM) and Directorate of International Customs (DIC). DG, ARM will be an Apex level organization dedicated to providing data analytics support to the CBEC for policy making and field operations of all wings of CBEC. It will also play the role of the National Targeting Centre. It will be a repository of data resources and will function primarily to provide Risk Assessment for GST and Customs formations.

With India ratifying the TFA of the WTO, the new Directorate of International Customs (DIC) would assist the National Trade Facilitation Committee headed by the Cabinet Secretary. It would also service the CBEC in all matters relating to FTAs, Customs Protocols & Agreements. DIC will also take over the customs policy work which is currently fragmented in the ICD Cell and DRI. Issues of alignment and review of various Customs Act/Rules and Foreign Trade Policy (FTP) to GST and to ensure Ease of doing Business are also proposed to be in the domain of DIC.

This brings us to the issue of 90:10 ratio for division of assessees below Rs 1.5 Crore threshold. The division of taxpayers in each State shall be done by computer at the State level based on stratified random sampling and may also take into account the geographical location and type of the taxpayers.

As per the FM's approved proposal, the new registrants shall be initially divided one each between the Central and the State tax administration and at the end of the year, once the turnover of such new registrants was ascertained, those units with turnover below Rs. 1.5 crore shall be divided in the ratio of 90% for the State tax administration and 10% for the Central tax administration and those units above the turnover of Rs.1.5 crore shall be divided in the ratio of 50% each for the State and the Central tax administration. The division of the taxpayers would be switched between the Centre and the States at such interval as may be decided by the Council. Both the Central and the State tax administrations shall have the power to take intelligence- based enforcement action in respect of the entire value chain.

A close analysis of the approved proposal reveals that the central focus of the re-organisation of the field formations has rightly been on strengthening of the Anti-evasion Directorate; Training, Information Technology and Appeal or dispute resolution. A good number of new offices would be set up by the DGCEI which would continue to play a critical role in intelligence-gathering and detection of GST evasion. Similarly, NACEN would become the hub for all sorts of training programmes for the next five years or till the time the GST settles down as an efficacious tax system. The DG (Systems) will be fortified to keep an eye on the revenue due to the Consolidated Fund of India.

Everything looks fine so far but I also get a strong premonition that may be after three years the number of posts sanctioned to the CBEC may not remain the same after the GST settles down. Once the assessees also settle down and the IT-driven system becomes predictable, the Union of India may decide to trim the size of the Central Tax Administration. If one goes by what the FM said in the Rajya Sabha, a beginning may be made for the creation of an All India Service for manning the GST Tax Administration. And I am sure even the GST Council would support and decide so. This may become more relevant once the 90 : 10 ratio finally reveals the actual number of small assessees. Let's hope whatever changes are done in the near future, it should just aim at a fair, slender and efficient tax administration facilitating the trade and industry apart from collection taxes for the CFI.

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Sub: Isn't Custom duty an Indirect Tax

The name Central Board of Indirect Taxes would have been more elegant, as the term indirect taxes includes customs duty also. Specifying customs separately in the Board's name is stating the obvious. When there is a CBDT, forming of a CBIT would have been more appropriate. Well, none can fathom the ways of Government.

Posted by Gururaj B N