The supremacy of GST over India’s messy indirect tax structure has been debated for long. Politicians, tax experts and tax administrators have struggled to articulate the best model suited to sustain the politically-sensitive balance of taxation power between the Centre and states. Chambers of commerce and industry are vying with each other to claim credit of compelling those who matter to usher in GST at the soonest. With the passing of the Constitution (122nd Amendment) Bill, 2014, by the Lok Sabha, the Union finance minister’s assurance of operationalising GST from the beginning of next fiscal has gained credibility, albeit sticking to the deadline is suspected.
GST holds promise of a common market of goods and services on the vast landscape of India and adding to the GDP. It would increase revenues and make exports more competitive. However, for realising the full potential of GST, its effective implementation by the tax departments holds the key. Efficiency and ‘customer satisfaction’ are the two most vital requisites for the success of GST. This is going to be a formidable challenge for central and state tax administrations, given their widely-held perception of unsatisfactory track record by taxpayers. Equally, this is an opportunity for tax departments to shun their weaknesses and exploit their strengths to face the challenge of providing a responsive, responsible and efficient tax administration for implementation of GST.
At the Centre, GST would be administered by CBEC. It has a huge cadre of qualified and competent tax officials manning field formations spread all over India. In the course of decades of its experience, it has navigated several tough terrain of reforms. Some of the more prominent reforms have been moving away from physical control over factories to self-removal of goods in 1968-69; introduction of MODVAT scheme in 1986; introduction of tax on services in 1994 and its gradual expansion, thereafter culminating in its pervasive character in 2012; abolition of the approval of price lists in 1994, followed by abolition of classification lists in 1995; introduction of the Cenvat credit scheme in 2004 to minimise the cascading effect of excise duties and service tax across taxation of goods and services.
A sea change in procedures has also come about. Registration can now be obtained online. The use of sophisticated IT tools by CBEC has blunted the procedural rigour of tax compliance. IT has also enabled taxpayers to pay taxes by simply clicking the mouse. Returns can be filed electronically. Any latest change in law, tax rate or procedure can be reached by taxpayers from anywhere at any time. All these are no mean achievements. By implementing the excise duty and service tax credit scheme, CBEC can also claim to be already administering the trappings of GST, which is a consumption tax characterised by smooth flow of input credit right up to the point of consumption of goods and services.
Having said that, there is no room for complacency. Wisdom would lie in utilising the intervening period to prepare for launching a refreshingly new culture of administration along with GST. It is necessary to dwell on the attitudinal changes needed all along the hierarchy to gain confidence of taxpayers, particularly for dealing with their grievances and resolving disputes. Officers need to be trained to ‘respect’ the rule of fair interpretation of law; their actions should not smack of hubris and arbitrariness. Attitude of officials at the cutting-edge matter most in improving or diminishing the image of tax department. They need to be sensitised to the ill-effects on the economy as a whole that is caused by indifference or harassment, delays in attending to taxpayers’ queries, ignoring genuine trade facilitations, and ill-conceived and mischievous interpretation of law. The apprehension entertained by most taxpayers that department is ‘ruled’ by the juniors need to be removed through visible and dynamic action by senior officials. Unfortunately—and true it seems to be, with only sporadic exceptions—the growing menace of reckless revenue-bias in adjudication of show-cause notices and appeals has done serious harm to the spirit of quasi-judicial fairness expected of officers in the department. Unmindful issue of notices and confirmation of unrealistic and time-bar demands on the slightest pretext of suppression of facts has greatly marred the confidence of taxpayers in the institution of departmental proceedings. It is time CBEC realises that it is one main reason for escalated queue of appeals in the Tribunal. Something is seriously wrong in the appraisal of performance of officers, with no fear of punishment for palpably irresponsible actions and decisions. That Ficci has demanded an exclusive cadre of officers for quasi-judicial work reflects industry’s diminishing faith in the efficacy of departmental adjudication.
One important offshoot of GST would be the impact on placement and posting of officials. Once GST takes the centre-stage, the initial few years of practical experience of its nuances and intricacies would be crucial to any officer’s future career. No officer would like to be deprived of his or her association with the ‘making of history’. Resultantly, after the introduction of GST, anyone still engaged in pre-GST regime related work alone would be grappling with feeling of lost opportunity. It is thus imperative and in the department’s interest that the backlog of cases pertaining to pre-GST tax regime is cleared. Innovative solutions are needed for this. For instance, CBEC can direct Commissioner (Appeals) to pronounce orders immediately after hearing. If Tribunal can do it in almost all cases, why not Commissioner (Appeals)? Take my word, this single step would boost the image of the department. Then there are a large number of cases in which hearing by the adjudication authorities took place months ago (years ago in many cases) but orders have not been passed. They need to be disposed of before the D-day. Surely, CBEC would also like to welcome GST in a swachh environment?
The author is a retired chief commissioner and former joint secretary in the finance ministry.