The Goods and Services Tax has been hailed as a ”game changer” but there are concerns being raised from various quarters on its implementation. According to V Lakshminarayanan, a tax lawyer and managing partner of a leading law firm, “GST is the best reform in the country, but the difference in rates will come up in disputes.”
Addressing a taxation related session at the All India Seminar on Economic Reforms held at Vigyan Bhavan, he also stated that GST is too complex to understand easily and takes hours of study before one can thoroughly grasp its impact in terms of implementation.
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“Those who were not in the economy, those who were at the periphery and those who were not in the tax net or functioned outside the system – they will all be brought under one net. Under GST, if a person abstains from a service, he is still liable to pay. Lawyers are not feeling the pinch of service tax because their clients are paying but if lawyers don’t pay the tax under GST, they are the losers. Expenses are incurred by law firms – all of these are available as credit to them if they are paid as tax. About 30% of a law firm’s revenue goes into such expenses. The Finance Minister has the last laugh when law firms break the VAT chain. If you are able to break the chain, you will be in trouble. If a law firm’s revenue is 10 crore rupees, then the law firm will have to shell out two crore rupees,” V Lakshminarayanan explained.
“With all these latest developments, chartered accountants are happy, lawyers think they are happy. Tax disputes are good for lawyers – however, it clogs up the judicial system,” V Lakshmikumaran quipped.
A word of caution that he issues to the Tax department officials – “Tax department must also behave in a civilized manner to people.”