GST is a destination based tax structure which is also totally a new concept for Indian Indirect taxation scenario. With the introduction of GST in the country, there will be certain significant changes in regime of Indirect Taxes. Under the new indirect tax structure, the tax will be levied by the state of consumption unlike the present system where levy is origin based. It will be leviable on each point of sale or provision of service which would be called as “Taxable Supply” in the new GST regime against the concept of manufacture, sale or provision of service. GST will have its two components i.e. Central GST (CGST) and State GST (SGST). The CGST and SGST will be levied and collected by Central and State Governments respectively. GST will subsume number of Central and State taxes such as excise duty, service tax, value-added tax, sales tax, purchase tax, central sales tax, luxury tax etc. Due to subsuming of these taxes in GST regime, there would be significant impact on the revenue of the States.
The state of Haryana is no exception to this and there would be significant impact of GST on the revenue and tax structure of the Haryana state. Therefore, the state of Haryana need to prepare itself for the introduction of the new proposed regime of GST. The basic requirements for the state are explained below:
Since, for the successful implementation of GST in India, a strong IT infrastructure and complete informational system is a pre and essential condition. Every state has to ready itself with requisite IT infrastructure in order to fulfill the requirement of e-payment of taxes, e-filing of returns & its annexures, e-correspondence by the authorities concerned. Following the same, the State of Haryana needs to prepare itself with minimum level of computerization, informational support system and services in order to handle the new indirect tax regime of GST. For the same, the Haryana government has to set up a consolidated advanced IT infrastructure across the state with real time features so that the Government could check revenue leakages, flow of credit and can also do cross verification of data in the automated processes.
In the present system, each department of taxation has different data regarding the same assessee because there is no integration among various stakeholders. In consideration of the same, integration of units (including check gates), stakeholders, agencies etc. is required under GST. Thus, the state of Haryana needs to integrate all the units within the states so that same information move through all the units and integrated platform could be achieved.
Training to Haryana Government taxation staff about the GST procedures, with due emphasis on advocacy, is central to the successful implementation of GST which is expected to be fully automated unlike the prevailing staff which is not equipped with sufficient knowledge of automated processes and making the system cumbersome and slow.
The state of Haryana has also to ensure that the manuals are prepared for standardizing the entire gamut of processes and align the present system with the GST. Manuals are mainly to have better understanding of transitional developments and procedures which will help in guiding the stakeholders. Manuals can be system manual, procedure manual etc.
The main task of the state of Haryana is to create public awareness and making the businesses, IT software developers, individuals and many other stakeholders understand the proposed taxation system and its benefits. The above are major areas where the state of Haryana needs to work upon in order to introduce and implement GST. Goods and Service Tax will be a major change for both the central as well as state governments. Many advantages are being expected by the governments by this structure. This new tax structure will also be beneficial for the Haryana government in the ways explained in following paras: It is expected that Goods and Service Tax will help in improving the tax base of the Haryana government in the following ways:
GST will be based on principle of “Consumption Tax” which makes Haryana Government able to tax the consumption of goods and services takes place in the state contrary to earlier laws when it levies tax as a state of origin. This new structure improves the base for taxation for the state which earlier not able to tax provision of services and manufacture of goods. It is expected that GST will have a lower threshold limit which will help the Haryana Government to absorb more assessee’s in the taxation system and have improved revenues in the state. As per the bill placed in the parliament no exemption has been proposed in the new GST regime which makes us understood that either there will be no exemption or will be kept at minimum. As far as exclusions are concerned, alcohol is the only excluded sector in the proposed bill. Consequently, the base for taxation will be vast for the state of Haryana.
Additional levy of 1% has also been proposed in the GST in order to compensate the state of origin of goods. As the state of Haryana is a major producing state with almost 1,000 crores of revenue per annum on account of purchase tax on food grains.
Thus, this additional levy will going to improve its treasury of the state. Haryana Government will also earn huge revenues from the SGST component in the Integrated GST which have both CGST and SGST component on interstate transaction of both goods and services. This is an advantage over existing system where Haryana is earning Central Sales Tax as state of Origin in case of interstate sale of goods only. In the new GST model with its nature of tax on consumption, state government will also get the power to tax on the imports of the goods and services in the state of consumption and will render the state with huge taxation base and the Haryana state has good manufacturing set up which makes it an import destination of raw material, machinery etc. By taxation of imports, the state of Haryana will get substantial revenue.
Here, we can also mention the Clause 19 of the 122nd Constitutional Amendment Bill 2014 which is passed by the Lok Sabha recently and has been sent to select committee of Rajya Sabha, which provides for the compensation to the states so that states will not lose their revenues from the introduction of GST.
In view of the above discussion and findings, I am of considered view that the interest of the state of Haryana would be adequately protected after implementation of GST across the country and the state will earn substantial revenue in the new indirect taxation scenario.