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IRS officers raise GST issues in letter to PM Modi

Highlight concerns such as cross-empowerment in IGST

By: ENS Economic Bureau | New Delhi |
Updated: February 26, 2017 1:59:38 am
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The Association of Indian Revenue Services (IRS) officers of Customs and Central Excise has written to Prime Minister Narendra Modi against the recent decisions taken by the Goods and Services Tax (GST) Council regarding the 90:10 division of control over tax assessees below annual turnover threshold of Rs 1.5 crore.

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In its letter to the Prime Minister dated February 21, the association has also highlighted its concerns regarding cross-empowerment in Integrated GST (IGST) with minimal carve-outs and converting supplies to territorial waters into intra-state supplies.

“The decision seems to be one-sided in favour of states weakening sovereign function of the Centre regarding levy and collection of taxes. Our apprehension is that GST in this form may not bring the desired goals of better tax compliance, more revenues, ease of business and reduction in inflation and an instant spurt in economic growth,” the association said in its letter.

The letter stated that “skewed distribution of assesses” does not bode well for the Centre-state fiscal balance of power. “With this ratio, the Government of India may lose revenue to the tune of Rs 1 lakh and 10,000 crore.”

It further said, “The vertical division that too in the ratio of 90:10 below 1.5 crore, is not only an undignified bad optics to the Centre but also is likely to lead to a situation where only 18 per cent of the assessee base is available with the Centre.”

After a long tug of war between the states and the Centre since September last year regarding division of control over tax assessees, the GST Council last month agreed upon a 90:10 ratio for states-Centre below the annual turnover threshold of

Rs 1.5 crore and an equal division of tax assessees above the turnover threshold. The arrangement between the Centre and the states in the ninth GST Council meeting to break the deadlock on division of control has been seen as a compromise on part of the Centre, as it has lost out on the maximum share of taxpayers under the threshold of Rs 1.5 crore.

The IRS Association has also written against the delegation of power by the Centre to state governments under Article 258, saying that it is an extraordinary power which can be used only where the Central bureaucracy is not available.

Also, the association said that the issue of Parliamentary oversight has not been addressed by the GST Council while taking decision on dual control. “IGST assessment errors by state government officers would go outside the oversight of CAG and PAC. CAG and PAC submit reports to Parliament, to which the CBEC tax administration is answerable. However, such oversight collapses once the powers under IGST is delegated to the states and effectively leads to grant of power without any accountability. This is Constitutionally impermissible,” it said.

The letter also spoke against the Council’s decision to make the territorial supply as intra-state supply, requesting the government to continue with the old practice.

The association in its letter has also questioned the proposed concept of One Tax One Nation, saying that the provisions of VAT Laws for checking of vehicles in transit have been carried forward in the draft GST Law, despite opposition by the CBEC officers.

Also, the multiple registrations for service providers proposed under GST go against the idea of One Nation One Tax, it added. “In the proposed GST Administrative Architecture, they will have to take around 30 separate registrations, thereby making them face 30 different tax administrations,” it said.

The Association said that multiple returns for service providers and banking sector will increase compliance cost. “Service providers in the banking, insurance, logistics, IT & ITES and aviation sectors are operating under a single centralised registration of service tax at present. That means, at present, they have to file 3 Service Tax returns in one year. In GST era, they will have to file 61 returns per state, per year, after taking registration in each state in which they have presence. So, a major Bank like SBI, which has branches in all 35 states and Union Territories, will end up filing over 2,000 returns annually. This does not seem to be in the spirit of ease of doing business, as it will lead to severe rise in compliance costs,” it said.

The Association has appealed to the government to have a separate settlement commission under the proposed GST, have exclusive role for Centre in territorial waters, revision of the division of assessees below Rs 1.5 crore in the ratio of 50:50, simplification of dispute resolution process and appointment of IRS officers as GST Commissioners in states, instead of IAS. It has also asked that the Chairman and CEO, GSTN be from IRS, or GSTN be placed under CBEC.

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