APRIL 24, 2017

By Siddharth Jain

"WE sleep safely at night because rough men stand ready to visit violence on those who would harm us." Winston Churchill said this is to exemplify the courage which our armed forces show in order to protect us. It is also important that the Government reciprocates the same by providing adequate infrastructure and facilities to the armed forces and the paramilitary.

World over, many Governments, including those of the USA and UK, provide exemption to their military forces, either directly to the Military bodies, or to their engaged personnel, through local State tax exemption certificates and also for procurement for foreign diplomatic missions.

The Canteen Stores Department, (CSD), is a solely owned Government of India Enterprise under Ministry of Defence and has its depots in all major military bases operated by the Indian Armed Forces. The canteen procures goods from various dealers and provides them duty free to its patrons. The duty not charged from its patrons, is then refunded to these stores by the respective State Government on adequate documentation.

Currently, CSD do not enjoy any excise duty exemption as CSD procures directly from traders or distributors (i.e. retails agents) and avails VAT exemptions, which is given to them either fully or partially through respective State Governments. Further, State Governments generally go through the refund route i.e. the canteens would first pay the VAT to the respective retailers and then seek refund from the State Governments. As per the feedback of many CSD personnel, the refund process is extremely tedious. It is quite an irony actually, where the State Government consistently seeks compensation for loss of revenue from the Central Government, whereas hundreds of crores is withheld for refund to CSD of the three forces.

A major advantage to the CSD under the GST regime will be excise duty refunds. Since, at the retail level, excise duty (and even service tax) is embedded in the cost of product, it is not available to the canteen stores separately. Whereas, under the single tax - GST regime, there will be only one tax which will be charged and subsequently refunded to the canteen stores department. Therefore, one can expect further reduction of cost by approximately 15% for CSD stores.

As per the business process report on GST refunds - It was recommended that the suppliers to CSD Canteens, Para Military Canteens would not be eligible for exemption. The procedure of first paying and then seeking refund as outlined for embassies, consulates and other UN organizations would apply in respect of supplies to CSD Canteens, Para Military Forces canteens etc.

Under the GST regime, the following provisions provide the sanctioning of refund for these canteens:Section 25, sub-clause (9) states - Notwithstanding anything contained in sub-section (1),–– (a) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries ; and (b) any other person or class of persons, as may be notified by the Commissioner, shall be granted a Unique Identity Number in such manner and for such purposes, including refund of taxes on the notified supplies of goods or services or both received by them, as may be prescribed.

It is expected that the Canteen Stores Department will be notified as a class of persons under this clause which "shall" be granted a unique identity number and hence will be eligible for refund. It is pertinent to note that the Government has taken a conscious decision to provide these entities a registration / UIN irrespective of any fallacies in their applications. Further, Section 55 of the CGST Act read with Rule 7 of the refund rules provide for detailed procedure of refund (quarterly) to persons allotted unique identity number.

Another important system of canteen stores exists with the police forces also. The Ministry of Home Affairs started the Central Police canteen system in 2006, which serves not only the State Police but also CAPFs (BSF, CRPF, CISF, ITBP, SSB and Assam Rifles). These canteens consist of civil and paramilitary forces. Presently, about 20-22 States provide exemption to these canteens and no liquor is available at these stores. It is expected that these canteens will also be treated at par with CSD stores under the GST era.

As a next step, it is expected and anticipated that the Government would identify and assign UINs to all such canteens, which can then provide their goods to their personnel at a much affordable price. It is a service that the nation owes to its brave men.

(About the author – Siddharth Jain, IRS (C&CE) is Assistant Commissioner, CBEC, New Delhi and the views expressed are strictly personal.)