Preparing for GST
Apropos of the erudite article by Rajeev Dimri “It’s time to prepare for GST” (FE, November 17), there are two very important aspects where I consider that the exposition is not quite correct. The first is about the taxes that will be subsumed in the GST. Dimri has said “while central GST is set to subsume excise duty, CVD and service tax, state GST is set to subsume VAT and entry tax etc.” This is not correct. The GST regime is that all these central and state taxes will be subsumed in the common base for GST. From this common base, a revenue-neutral-rate will be worked out. A certain percentage of this rate will be paid as central GST (CGST) and the other part will be paid as state GST (SGST). The authentic exposition is available in First Discussion Paper on GST in India issued by the Empowered Committee on 10.11.2009 (known as White Paper). In the paragraph 3.4, the following is written: On application of the above principles, it is recommended that the following Central Taxes should be, to begin with, subsumed under the Goods and Services Tax—(i) Central Excise Duty, (iv) Service Tax, (v) Additional Customs Duty, i.e. Countervailing Duty (CVD). Following State taxes and levies would be, to begin with, subsumed under GST—(i) VAT/Sales tax, (vi) Entry tax not in lieu of Octroi. This shows that all taxes will be subsumed in GST not separately in CGST and SGST. The second issue is where he says “In general traders and service providers are set to gain additional tax credits under GST.” This, too, is not correct. The input tax will be higher at, say, 27%, and so what they will get as credit will be possible if they have paid the input tax at higher rate. No credit is given unless the tax is actually paid on the basis of an invoice. The effect will be neutral.
Sukumar Mukhopadhyay
smukher2000@yahoo.com