Implement GST by April 1, 2011 - Maharashtra Sales Tax Commissioner
SANJAY Bhatia, a 1985 IAS Officer, Commissioner of Sales Tax, feels that we should put the system in place and have the GST by 1.4.2011. He says, “you can't do it in October, you can't do it in September. This is a huge reform. Central taxes getting combined with state taxes as a single tax, It has to be in the beginning of the year. Then also with clear prior notice, we should resolve most of the problems by April 2010 and then set up the system upto April 2011 so that we can start.”
Bhatia was a Member of almost all the Committees on GST including the constitutional amendment committee. He notes that although empowered committee consists of state finance ministers but government of India representatives are also present in that. There is an advisor of finance minister, the additional secretary is present, the joint secretary is present and they have been present in all the deliberations but when paper came out; the paper came out as the first discussion paper of empowered committee of state finance ministers and not a joint paper. So that indicates that there are some issues today between GOI and the states also.
His comments on some key issues:
GST and rates
Once the cascading goes the rates have to come down. Second reason for the rates to come down finally would be the widening of the tax base because service tax has a separate base, goods have today a separate base when they combine together the base becomes widened. Similarly simplify tax structure then possible reduction in prices– 1.4% of gross domestic product (GDP) growth.
What does 1.4% amount to?
It amounts to more than Rs 50 Lakh Crore of growth in the economy with this coming in. Central taxes which are getting subsumed, excise mainly central excise and its related taxes; service tax, additional customs duty, the CVD is part of this and all its surcharges and cesses these are the central taxes which are coming in. What are the State taxes which are getting into this – VAT, entertainment tax, luxury tax, taxes on lottery, betting and gambling - State cesses and surcharges as long as they relate to goods and services;
Will Central Sales Tax (CST) be abolished?
CST will be abolished on the goods and services which are part of GST.
Implementation through multiple statutes, although there are multiple statutes but that multiple statute is going to be commonly decided. Basic features of the law need to be uniform.
GST rate structure:
Maharashtra has been propagating a single rate because a single rate would have come to about SGST 8 and roughly CGST 8 or 9 so we could have about 16% roughly.
Threshold:
States uniformly decided that the threshold will go up from 5 lakhs which we have today turnover to 10 lakhs and because 5-10 is not very-very material and except for the North-Eastern states they were saying but we do not have people who are above 10 lakhs so we won't have any revenues so for them some special arrangement will be made. But for CGST what will be the threshold? What the states have proposed is 1.5 crore. Government of India has not agreed and this also creates another problem.
Original Problems:
you will have to identify what is the service and you will have to identify what is goods. So what does that mean – all your original problems of works contract, what part of that is service and what part of that is goods continue, all those problems continue. What we are saying is that whatever is the rate for goods and services it should be the same rate; it should not be a different rate so that we do not have to identify what is a good and what is a service.
Exporters would be zero rated
and similar benefits may be given to SEZ and such benefits will only be allowed in the processing zones of the SEZ and no benefit of sales from SEZ to domestic tariff will be allowed and that is a crux of the zero rating of exports.
Constitutional amendments are a major issue and we have not been able to resolve this issue. Goods after the manufacturing stage are in the state list, services are in the central list, manufacturing goods are in the central list. Question is whether it should come in the concurrent list, if it comes in the concurrent list, if there is a dispute centre has the sway; states are not agreeable to that; so what is the solution.
This deadline of April 1, 2010
is not possible at all - you have to build up the IGST model, you have to resolve all this issues and at least for Maharashtra we do not want a half break solution.
Something's come and then we are in a fix, we are neither near nor there so we would like everything to be done properly, proper computerisation, do it and then by April 1, 2011 bring it. In fact the mistake which we have encountered earlier, in VAT you would be aware that Maharashtra is the only state which shifted from geographical jurisdiction to functional jurisdiction. Other states are still continuing with that what is geographical jurisdiction. There is a sales tax officer he has a particular jurisdiction, he has a ward so he looks after that area. We shifted from that to functional jurisdiction; nobody has one to one relationship. Without computerisation that became a huge issue for us. For first year we were facing a lot of problems now when the computerisation is taking place and it is come to a particular stage functional is much better- all other states are coming forward and doing it. We do not want to commit the same mistake again. Let us have some level of computerisation. Let us have those returns processing areas, processing methods and then by April 1, 2011 let us do it.