GST runs into problems in FM Arun Jaitley's own backyard

Written by Shruti Srivastava | Shruti Srivastava | Subhomoy Bhattacharjee | New Delhi | Updated: Jul 14 2014, 13:42pm hrs
Arun-JaitleyFM Arun Jaitley was expected to announce a date for the switchover in this Budget, but he instead said it would need the states to come on board.
The biggest tax reform measure in the country, Goods and Services Tax (GST) has run into problems in his own backyard just days after finance minister Arun Jaitley has announced plans to bring it in this fiscal.

The chief of the Central Board of Excise and Customs (CBEC) JM Shanti Sundharam has alleged her team has not been consulted in critical stages of formulation of the constitutional amendment needed to bring in the new tax regime to replace the current indirect taxes.

We did not even get the recent re-revised draft of the Constitutional Amendment Bill from the department of revenue, she said.

Significantly the two boards of direct and indirect taxes are part of the revenue department in the ministry of finance.

She also said her board is unaware if it is the states which are holding up the roll out of the GST, even though Jaitley has said in post-Budget interviews that it is indeed so.

In an interview with The Indian Express, Shanti Sundharam said, ...that aspect (consultation with states) is being handled by the department of revenue. We have pointed it out to the revenue department that since the CBEC is in charge of the Centres finances, consultation on matters relating to GST would enable a harmonious resolution of issues.

Her comments have brought to the fore for the first time, the concerns of the indirect tax department that they could be sidelined if the national GST is rolled out.

But top level government officials said Shanti Sundharams charge is unfounded. Differences among government departments are not uncommon but there are ways to resolve them, one of them said.

This source also said the final version of the Constitutional Amendment Bill is a work in progress so there is no reason to believe that the CBEC will not be consulted or taken on board. The work is progressing with all departments giving their inputs, the source added.

GST aims to replace almost all the indirect taxes in the country with a single tax. It will replace central excise, customs duty and services tax, all now administered by Shanti Sundharams board, as well as state level taxes, to build a common Indian market.

The finance minister was expected to announce a date for the switchover in this Budget, but he instead said it would need the states to come on board. Differences within the finance ministry were not brought up by him.

On other issue of CBEC not handing over data on taxes to the newly formed IT backbone company for GST, Sundharam said, We had all this data in our project. GSTN (GST Network) wanted to take over this pilot project from CBEC. That was also a part of the Cabinet note. At that point, I dont think anybody went through what it contained. The asset was the database, which had come to us and was kept by us in a fiduciary capacity. We are not permitted to handover this data even to the ministry of corporate affairs. Where is our legal authority to hand over database of names and their registration numbers Since the legislative route of getting this thing done is time consuming, I had suggested an alternative of building the necessary safeguards.


On Gold imports:

We will have to wait for the government to take a call on cutting gold duties. The CAD has come under comfortable limits. It is true that there has been an increase in smuggling. DRI has made it clear and the government is aware of that. But currently no decision has been taken on gold import duty. If we look at it from the point of revenue, we did have very high revenue earnings from gold because rates were very high.

On penal interest FOR DELAY IN SERVICE TAX:

On the 30 per cent interest levied on delay in payment of service tax, this has been done for cases where service tax is collected and not deposited with the government. You cant collect something that belongs to the government and not pay it. You need the deterrent kind of interest. As such it is not a compounded interest but only simple interest. This is justified.