THERE IS NO FUTURE OF GST IN INDIA IN NEAR FUTURE

- THERE IS NO FUTURE OF GST IN INDIA IN NEAR FUTURE-

-CA SUDHIR HALAKHANDI

THE DISCUSSION ON DTC NEARING COMPLETION

25. I am happy to inform the Honorable Members that the process for building a simple tax system with minimum exemptions and low rates designed to promote voluntary compliance, is now nearing completion. On the Direct Tax Code the wide-ranging discussions with stakeholders have been concluded.  I am confident that the Government will be in a position to implement the Direct Tax Code from April 1, 2011.

WE ARE TRYING FOR CONSENSUS ON GST

26. On Goods and Services Tax, we have been focusing on generating a wide consensus on its design. In November, 2009 the Empowered Committee of the State Finance Ministers placed the first discussion paper on GST in the public domain. The Thirteenth Finance Commission has also made a number of significant recommendations relating to GST, which will contribute to the ongoing discussions. We are actively engaged with the Empowered Committee to finalise the structure of GST as well as the modalities of its expeditious implementation. It will be my earnest endeavour to introduce GST along with the DTC in April, 2011.

IT TECHNICAL ADVISORY GROUP

104. An effective tax administration and financial governance system calls for creation of IT projects which are reliable, secure and efficient. IT projects like Tax Information Network, New Pension Scheme, National Treasury Management Agency, Expenditure Information Network, Goods and Service Tax, are in different stages of roll out. To look into various technological and systemic issues, I propose to set up a Technology Advisory Group for Unique Projects under the Chairmanship of Shri Nandan Nilekani.

ENOUGH HAS BEEN SAID IN PREVIOUS PARA

118. I had stated last year that tax reform is a process and not an event.  The process I had outlined in the area of direct taxes was to release a draft Direct Taxes Code along with a Discussion Paper.   In the area of indirect taxes, the reform initiative was the introduction of a Goods and Services Tax. I have presented the developments in both reform initiatives in Part 'A' of my Speech.

SERVICE TAX RATE AT 10% TO MAKE A WAY FOR GST

179.     To bridge this gap, I had the option to raise the rate of service tax to 12 per cent as it was before I introduced the third stimulus package.  I am not resorting to this option to maintain the growth momentum and also to bring about a convergence in the rates of tax on goods and services.  I, therefore, propose to retain the rate of tax on services at 10 per cent to pave the way forward for GST.

155. It is my sense that there is a large consensus that the country should move towards a National Level Goods and Service Tax (GST) that should be shared between the centre and the states. I propose that we set April 1, 2010 as the date of introducing GST. World over, Goods and Services attract the same rate of Tax. This is the foundation of GST. People must get used to the idea of a GST. We must progressively converge the service tax rate and Cenvat rate. I propose to take one step this year and increase the service tax rate from 10 percent to 12 percent. Let me hasten to add that since service tax paid can be credited against service tax payable or excise duty payable, the net impact will be very small.

1. National or dual GST.

2. The tax rate dual or single.

3. The exemption list.

4. The threshold for Central Goods and service tax.

5. The matter of purchase tax and tax on alcohol products.

82. In the course of preparation of this budget, I have had the opportunity to interact with large number of stakeholders and receive valuable inputs.  Most suggestions were for structural changes in the tax system.  Tax reform, like all reforms, is a process and not an event.  Therefore, I propose to pursue structural changes in direct taxes by releasing the new Direct Taxes Code within the next 45 days and in indirect taxes by accelerating the process for the smooth introduction of the Goods and Services Tax (GST) with effect from 1st April, 2010.

1. The National GST is not possible in our federal system.

2. In case of Dual GST there will be lot of complications for trade and Industry which are not considered by the lawmakers both the central and state level but the basic fact is that both centre and states have differences on basics of dual GST.

3. Since 2006 the Finance Ministers are only making only ceremonial statements because basically they are well aware of the fact that simplification will only be the result of national GST which is not possible and in case of dual GST the states will not agree on centers format.

4. The best chance for the law makers was udget-2010 in which they should have declared that GST will be implemented in India on some basics only.