PHDCCI CALLS FOR GST DEBATE WITH INDUSTR
New Delhi, Monday 2nd July 2007 – Intense public debate on the modalities of introduction of Goods and Services Tax (GST) should commence now to pave the way for its smooth implementation from 2010, according to PHD Chamber of Commerce and Industry (PHDCCI).
“Though a good beginning has been made by announcing the intention to switch over to GST, a lot of complex issues like type of GST suited to Indian conditions, rate of tax, phasing out of Central sales Tax (CST) by 2010 and convergence of excise duty , service tax and VAT rates, methods and infrastructure for collection of the taxes and a host of other items should be examined in detail and a feasible solution worked before introduction of the GST,” says Mr Sanjay Bhatia, President, PHDCCI.
Stressing the need for laying a road map for introduction of the GST, PHDCCI said that the foremost issue is to decide whether GST is going to be a single or dual one. As per the reports percolating, it appears that the Centre is considering three approaches. One is an exclusive central levy to be shared among the States on a pre-determined basis, two, a dual levy-at Federal and State levels and third, envisages dividing the right to tax specified goods and services between the centre and States. Vexatious issues like whether the States would abdicate their tax imposition and collection powers as they enjoy now, once they become eligible to impose and collect tax under a dual system, how can they ensure uniformity in levying taxes for goods and services, what are the goods that have to be designated under the purview of the States and the Center etc are some of the crucial points that need to be discussed threadbare and decided. “These are not mere economic issues but have considerable political connotations and a consensus cutting across party affiliations is possible though time consuming and complex,” says Mr Bhatia.
Next in importance, PHDCCI said, is integration of VAT on services and goods both in its design and administration and determination of an effective, workable and productivity–friendly rate of tax, before switching over to GST. Globally, GST is around 20 per cent. In India, the indirect taxes burden-both Central and States-works out to over 30 per cent. In case a negative list is framed for exclusion from the tax net as recommended by the Kelkar committee, it is necessary to cap the rate since arbitrariness would lead to unrealistic imposition of taxes, which would be against the cannons of taxation such as equity and fair play. “ We have to move towards a certain and predictable tax regime across the country to facilitate large FDI inflows since internal generation of resources to fund green field projects and expansion and diversification of the existing ones will be inadequate in the coming years as we enter a higher trajectory of consumption led economy from the present state of an investing mindset,” says Mr Bhatia
Highlighting the importance of creation of a common market before switching over to GST, the Chamber opined that the inter-State trade barriers should be removed. “Proliferation of taxes, a historical legacy, should be done away with by overhauling and converting State and local level taxes like , entry tax, mandi tax, turnover tax etc into one, which can be levied at a single point rather than at multiple points,” says Mr Bhatia adding that “PHDCCI has been in the vanguard to facilitate the North Indian Common Economy (NICE) by creating consensus among the administrations in the States to move towards a common market and to strike harmony in VAT Acts especially in rates, classification and procedures.”
Laying emphasis on a state-of-the-art digital infrastructure before switching over to GST, PHDCCI said that successful operation of Tax Information Exchange System (TINXSYS) should be established at the earliest linking all the states and digitizing all departments of the States and check posts. The Chamber’s discussions with the Northern States for e-linking them are at a very advanced stage. |
