The fine print of the item-wise rate structure under the proposed goods and services tax (GST) regime could extend beyond May, as the GST Council might not announce the details immediately after deciding the fitment of items in the multi-tier indirect tax framework. Revenue secretary Hasmukh Adhia told The Indian Express that announcing the rates in advance could provide an opportunity for arbitrage, especially for those items that might see a major change in their tax rates under the proposed indirect tax regime. “Rates aren’t needed (for preparation of industry); we can give those on last day also. In indirect tax, we always declare rates on the last day. Rates are not essential for people to make their ERP (enterprise resource planning) system. Not a lot of preparation is needed for that. On the contrary, rates in advance may also create problems where there are major changes,” Adhia said, when asked whether announcing rates in May will leave enough preparatory time for industry before the targeted rollout of GST from July 1.
He added that giving prior information about the taxation structure for items under GST will provide space for people to misuse it. “That’s what happens. At the time of Budget, apart from lobbying, people misuse that information for arbitrage with respect to rates. Whether to stock or not and things like that…so, we will see. Council will decide at what stage to announce it (rate structure for various items).”
In the fitment exercise, Adhia said services having a combined tax incidence of more than 20 per cent or 28 per cent will attract a higher rate of taxation than 18 per cent, adding that activities such as betting and gambling could attract a higher taxation rate. “We’ll see if there are any such services which are to be charged at higher than 18 per cent. We are yet to study the betting model and the gambling model. There are taxes on those also. We don’t know what is the existing (total) entertainment tax and VAT on these activities.”
The revenue secretary said the rates under GST will be closer to the existing combined tax incidence of goods and service. “…our basic purpose is that whatever is the existing rate of tax on a commodity or a service, the rate in GST will be similar. Won’t be too much higher or lower than that. We’ll try to fix it. If there’s a service on which the combined entertainment tax and VAT is more than say 20 per cent or 28 per cent, so we may have to think about it…if there is some such service, where the incidence is already more, why should we give them the benefit of (tax) reduction,” he said.
The service tax rate will also be modulated for those those sectors which will not be able to avail benefit of input tax credit because of not being included under the GST ambit, the revenue secretary said. “If there’s any sector which is not getting input tax credit for their inputs, such as petroleum, accordingly the service tax rate will be modulated. That will be taken care of in the fixation (of rates),” Adhia said.
In its next meeting on May 18-19, the GST Council is likely to give final approval to the four pending sets of rules pertaining to the GST along with taking up the rate structure in relation to individual commodities for consideration.
On the legal provision to have an anti-profiteering authority, Adhia said that action will be taken only when “absolutely necessary” even as Information dissemination under the GST regime will obviate the need for any action. “It (anti-profiteering authority) will take action only if absolutely necessary based on complaints. That will also happen only in oligopoly or monopoly situation. Anyway, most of the products in India are competitive. We need not ask every trader, whether you passed on (reduction in prices) or not. But, yes we need to have legal enabling provision because if some company takes us for a ride, we can set them right. Information will also take care of it. The moment we tell a consumer that this was your earlier incidence and now this is your new incidence, the consumer will face the dealer that how can you charge more, when GST has reduced (the tax incidence). So, information dissemination will obviate the need for any action. Consumer awareness is most important,” he said.
Clause 171 of the CGST Bill provides that any reduction in rate of tax on any supply of goods or services, or the benefit of input tax credit shall be passed on to the recipient (consumer) by way of a commensurate reduction in prices. The Bill also provides for creation of an authority or empowering an existing authority to exercise the powers related to anti-profiteering measure.
When asked about the refusal of GSTN to CAG for auditing its work, Adhia emphasised that the auditing body has got all powers to audit GSTN. “There’s no such thing. We have already told that CAG will be fully auditing GSTN…CAG has got powers to audit all receipts of states as well as Centre and that power is inherent in the CAG Act. So the receipts that are coming to states and central government will be audited by CAG. GSTN as a company, their audit also will be done by CAG. They already said so…by CAG or CAG-appointed auditors,” he said.
GSTN is non-government a private limited company set up in 2013 to provide information technology support for the implementation of the GST. CAG is reported to have written to the finance ministry asking for access to GSTN’s data network after the latter refused to allow the auditor to see the details citing that it was a non-government company.