Chapter-5

CONCLISION AND SUGGETION

CONCLUSION:

It is encouraging that when GST was introduced in New Zealand in

1987, it resulted in 45% higher revenue than expected, mainly due to improved
compliance. VAT has really showed a progress in many States and the Centre has
rightly compensated to many States. The success story would continue by the
implementation of GST in India. There were hurdles and agitation for implementation
of VAT in India. Puducherry was the last but before/State to implement VAT. GST is
an extension of VAT which includes services also. Initial losses of revenue to States
would be compensated by the Centre. When GST is implemented in good spirit the
revenue of both Central Government and State Government shall be increasing in the
long run. The main lag behind the implementation of GST is due to differences
amongst the Centre and States on the RNR (Revenue Neutral Rate), compensation
package and its Constitutional amendment which is required to be passed with two-
third majority in both the Houses of Parliament and ratification by a simple majority
by at least half of State assemblies.
The Centre has decided to review the existing exemptions from Central
Excise Duty so that list of goods exempt from CGST and SGST list and 99 items
exempted from VAT are taken off from both the components of GST. VAT has to
some extent reduced tax-evasion and frauds. It is encouraging to note that most of the
traders and general public are aware of VAT. GST, the major reforms on indirect
taxes, will reduce tax burden due to cascading effect. The efficiency in tax
administration will be improved, indirect tax revenue will be increased considerably
due to inclusion of more goods and services, and at last the cost of compliance will be
reduced for the dealers. The implementation of GST will be in favour of free flow of
trade and commerce throughout the country. This single most important tax reform
initiative by the Government of India since independence provides a significant fillip
to the investment and growth of our country’s economy. To get the desired result, it
should be assured that the benefit of input credit is ultimately enjoyed by final
consumers.
 The Union Finance Minister Shri Pranab Mukherjee (Meeting of
Empowered Committee) on 18th July, 2011 has assured to include necessary
legitimate issues in the amendment bills as desired by the States through the
empowered committee.
Introduction of GST is a desire need for the multinational companies as most of the
countries have already implemented GST. In spite of several hurdles, there is a scope
for implementing GST in April 2012. Reforms are always continuous and all should
ready, receive and enjoy the fruits of that.
The present study was an empirical study on the opinion of experts,
including the tax authorities, traders and general public on the administration of VAT
in Puducherry. Based on the interaction with traders and experts group the researcher
understood the former scope for research. A separate study could be undertaken on
ways and methods to curb tax-evasion in all forms of taxes like excise, sales tax,
service tax and income tax. Another could also be taken on the situations that lead to
discrepancies in
sales tax assessment and the settlement system. Being VAT is in transitionary period a
special study could be done immediately after the introduction of Proposed GST.

POINTS TO PONDER : FOOD FOR THOUGHT:

The GST is a very good type of tax. However, for the successful
implementation of the same, we must be cautious about a few aspects. Following
are some of the factors that must be kept in mind about GST:

1) Firstly, it is really required that all the states implement the GST together
and that too at the same rates. Otherwise, it will be really cumbersome for
businesses to comply with the provisions of the law. Further, GST will be
very advantageous if the rates are same, because in that case taxes will
not be a factor in investment location decisions, and people will be able to
focus on profitability.
2) For smooth functioning, it is important that the GST clearly sets out the
taxable event. Presently, the CENVAT credit rules, the Point of
Taxation Rules are amended/ introduced for this purpose only. However,
the rules should be more refined and free from ambiguity.
 3) The GST is a destination based tax, not the origin one. In such
circumstances, it should be clearly identifiable as to where the goods
are going. This shall be difficult in case of services, because it is not easy
to identify where a service is provided, thus this should be properly dealt
with.

More awareness about GST and its advantages have to be made, and professionals
like us really have to take the onus to assume this responsibility.

SUGGETION:

Taxation of Inter-State supplies of goods and services:

The Tax Force has recommended that the taxation of inter-state
supplies of goods and services be governed by the modified banking model. The
principle that the Task Force has kept in mind in recommending this model is that of
zero rating of goods in the state of origin and the charge of the tax of such goods in
the destination states, in line with the objective of introducing a destination based
consumption tax thro-ugh the introduction of the GST. The above recommendation
has also been extended to consignment sales and branch transfers.

Exports and imports:

Exports will be zero-rated, with the benefit of recouping of input taxes
as well. Both CGST and SGST will be levied on imports of goods and services into
the country. Here again, the incidence of tax will follow the destination principle. Full
and complete set-off will be available on the GST paid on imports of goods and
services.

Tax administration and compliance:

All compliance and enforcement procedures under the CGST and the
SGST should be uniform. The basis for division could be turnover or any other
criteria which is considered reasonable so that the compliance and administrative
burden is minimised. A common IT infrastructure serving the needs of both CGST
and SGST should be established by the Central Government.

Registration:
The GST registration number should be a PAN based twelve digit
alphanumeric number. Dealers having branches across States should have multiple
GST registration numbers, based on the number of States in which they operate.

Payment of taxes:
One single payment is to be made both for CGST and SGST by
assessees and the transaction reporting should be made through a combined payment
and transaction reporting statement in the prescribed format (Form No. GST-I).

Treatment of current area based exemptions:

The existing area based exemptions in respect of CENVAT should be
discontinued and if need be a direct investment linked cash subsidy may be provided
to support the industry, for balanced regional development. The idea is to not break
the GST chain with regard to both CGST & SGST.

Taxation of tobacco, alcohol and petroleum products:

The Task Force recommends extension of the GST to all goods,
without exception. It has also recommended that tobacco, alcohol and emission fuels
should be subjected to both GST and excise. However, no set off of input tax credit
for excise would be available. Industrial fuels should be subject only to the GST with
full benefit of input tax credits.

Fiscal autonomy of states:

In a major and welcome recommendation, the Task Force has
suggested that in order to permanently institutionalise the States’ collective decision
making mechanism, the Empowered Committee of State Finance Ministers (EC)
should be transformed into a permanent Constitutional body known as the Council of
Finance Ministers under the Chairmanship of the Union Finance Minister with the
State Finance Ministers being the members of the Council.
Roadmap for GST implementation:
A phased approach should be adopted for implementation of GST
whereby in the year 2010-2011, the single CGST and SGST rates of 5 per cent and 7
per cent as recommended should be adopted and transactions in the real estate sector
should be brought within the ambit of GST with the levy of stamp duty not exceeding
4 per cent.
In the year 2011-12, the rate of stamp duty should be reduced to 2 per
cent. In the year 2012-13, the stamp duty should be eliminated and replaced by a
nominal registration fee at a specific rate.