Industry body Assocham pleads before Parliamentary panel a distortion-free GST

Pitching for a distortion-free Goods and Services Tax which can bring down costs of goods and services by 15-20 percent, a team of top tax experts from industry body Assocham has placed before the Parliamentary Committee its opposition to additional non-creditable 1 per cent tax on inter-state supply of goods, as proposed in the Goods and Services Tax (GST) Bill. Assocham in a meeting with Parliamentary Standing Committee on Industry yesterday, emphasised the need to introduce GST at the earliest to accelerate growth and make India more competitive. It said the move would defeat the purpose of GST and adversely impact the ease of doing inter-state business.

“Clause 18 of the Bill proposes an additional tax of 1 per cent on supply of goods in the course of inter- state trade or commerce which will be levied at source. The Bill provides the term of the additional tax as 2 years or such other period as the GST Council may recommend. The proposed levy of 1% additional tax by the Central Government for the benefit of originating States is detrimental to the industry and defeats the objectives of GST,” the Assocham pleaded before the Parliamentary Committee.

It said such a levy retains characteristics of origin based GST levy thereby hampering the business efficiencies and free cross border movement of goods. One of the promises of GST is to make India a common market and remove the cascading impact of taxes.

The proposed additional tax levy not only distorts this promise but also results in cascading where goods move inter-State on account of multiple stock transfers to own depots, job-work, sales returns, etc which are all business imperatives. Any non-creditable tax levied in the origin state is inflationary, according to the Assocham submissions before the Parliamentary panel.

The chamber paper said, goods move several times from one State to another during the production & distribution process. The goods are produced in various locations for reasons of availability of raw materials and manpower, and stored at common distribution centres for ease of distribution and marketing. The cumulative burden of 1 per cent on interstate movements would far exceed the statutory rate of 1 per cent and would be crippling.

“The cost of indigenous products and services can reduce up to 15 to 20 per cent, if distortions in the existing tax system are removed, which is significant saving to have favourable impact on prices and competitiveness of Indian industry. Creation of a common market will have major impact on the growth of trade and industry in India.”

“Replacement of the existing multiple tax structure by an efficient ‘Goods and Service Tax’ structure is therefore imperative for India’s competitiveness and sustained economic growth, said Nihal Kothari, Chairman, Assocham National Council of Indirect Tax according to a press release issued by Assocham.

While it is imperative that GST is implemented without any further delay, it is essential that Trade and Industry should be consulted in finalising the GST structure and administrative procedures so that the desired objectives from GST are achieved and benefits are realised by all stake holders viz Industry, Revenue of Central and State Governments and to the consumers in the form of reduction in prices in due course, said Kothari.

Since the Bill does not propose any constitutional mechanism to make the recommendations of the GST Council binding on the Union and the States, a State may ignore the recommendations of the GST Council and may frame laws in any manner and levy GST at whatever rate it deems fit.

This may affect stability of the GST structure. Thus, the Assocham has recommended that Article 246A, in line with the proposed Article 269A must be amended to specify that the power to make laws and levy goods and service tax would be within the framework of recommendations of the GST Council.

It also said that the recommendations of the GST Council should be binding on Centre and States.

SOurce : Merinews.com

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