DEAR, NEARS, FEARS FOR GST

         

   As GST nears, CBEC officers get jitters about job security

    As the deadline for implementing Goods and Service Tax (GST) across the country nears, there is growing unease among officials of the Central Board of Excise and Customs about their job security and future, according to Cogensis   report."Any change causes anxiety," an Indian Revenue Service officer said. "If the   government   thought, a change as big as GST will not lead to any protests, then they are functioning in a utopian world." The government is planning to implement GST from Apr 1, 2017. In a letter to Chairman of Central Board of Excise and Customs Najeeb Shah, the Association of Indian Revenue Service (CBEC) has expressed apprehension over job security, especially since   the GST Council is discussing dual   control  over  service  tax assessees. There are currently   about 1.1  million service tax assessees, who are directly assessed by  the  CBEC. "If  the service tax  assessees are divided between Centre  and  states  that  could  mean lesser  requirement for  service tax officials," another officer said. The GST Council in its last meeting decided to reconsider the earlier decision to allow Centre to have sole over  existing  service tax   assessees under the new tax regime. The GST Council had last month decided that the Centre will have sole control over the assessment of existing 1.1 million service tax assesses. The  service   tax assessees added will be divided between the Centre and states. Most states are opposed to the    entire   service tax  vertical  being solely  handled  by the Centre. The  letter  by  the association, sent a  fortnight ago,  has  also  raised  worries  about fully automating the GST network." We are worried that an entirely digital system will start replacing humans," another official said. Shah has assured the officials that their interests will be taken care of under the new  indirect  tax  regime.    "The chairman   has   assured to   protect  our  interests  and communicated to us in his reply that we have nothing to worry about," the second official said. The chairman has said with GST, the tax base would only increase, which would mean work for more people. Notwithstanding the assurances, the unease is only likely to grow. 

 

   Right GST rate can unlock India’s potential

By next April, India aims to introduce the dual GST to provide a common nationwide market for goods and services. Under the proposed indirect tax reform, both central and state governments will have concurrent taxation power to levy tax on the supply of goods and services. The proposed regime is expected to improve tax collection and minimize leakage.

Though Parliament passed the GST Bill this year and began working on implementing it, there are many teething troubles, one of them being the revenue neutral rate (RNR), which is the rate at which there is no revenue loss to the Centre and states.

THE TUSSLE OVER RNR

The states want the RNR to be high, above 20%, to ensure they do not lose revenue, while industry wants it to be around 18%, implying that higher tax will hurt them.

So far, a range of rates have been proposed. Earlier, a National Institute of Public Finance and Policy report suggested a revenue neutral rate of 27%. In 2009, a task force of the 13th finance commission suggested a GST rate of 12% (5% central GST and 7% state GST). However, 27% is considered too high and 12% too low even by international standards.

A survey of 132 countries by KPMG International Cooperative’s Corporate and Indirect Tax Rate Survey in 2014 showed that the highest GST rate was 27% in Hungary and the lowest 1.5% in Aruba. The 10 highest rates ranged from 27% to 18%.

The government at some point will have to make a tradeoff between collecting enough revenue and not overtaxing people. Moreover, a high tax can trigger inflation. An RNR with a lower rate of 12% and a standard rate of 22% would increase inflation by around 0.3-0.7%.

Today, the overall tax rate totals to around 26%, 12% excise duty and 14% VAT on goods. And since the tax rate now for services is nearly 15% with the Swacch Bharat cess, if the RNR is greater than 15-15.5%, the rate for services will be in the 20-22% range, making the GST seem like a considerable tax rise. So what then should be the ideal tax rate?

OPTIMUM TAX RATE

Ideally, the tax should be levied comprehensively on all goods and services at a single rate to achieve the objectives of simplicity and economic neutrality. But that may not be viable politically due to concerns over the distribution of tax burden (e.g., food) or because of administrative and conceptual difficulties in taxing certain sectors. This then leads to exemptions.

This explains why the Centre has proposed a four-slab rate structure for GST, ranging from 6% to 26%. The structure proposes zero GST on many goods and services, such as food, health and education, and slabs of 6%, 12%, 18% and 26% on remaining goods and services with the highest tax on luxury items such as fast-moving consumer goods and consumer durables. It also proposed a cess over and above the GST rate on ultra-luxury items and demerit goods, such as big cars and tobacco products.

But multiple rates increase the costs of administration and compliance. They lead to classification disputes, require more record keeping and create opportunities for tax avoidance through misclassification of sales.

INTL EXPERIENCE

The GST regime has been most successful in countries, with the exception of a few Scandinavian nations with the rate of around 25%, which had a broad base and a modest tax rate in the beginning. For example, the New Zealand GST was introduced at the rate of 10%, with a base consisting of virtually all goods and services (with the exception of financial services).

The Singapore GST was introduced at 3%, which has now been increased to 7% as inefficient excises and customs duties have been eliminated. On the other hand, in Europe, the regime is not as efficient as the taxes have been levied at multiple rates.

WHAT GOVT PANEL SAYS

In December 2015, a government committee, chaired by Arvind Subramanian, chief economic adviser, recommended an RNR in the range of 15-15.5%. It said the average standard rate for comparable emerging market economies was 14.4% with the highest standard rate being 19% and even in the high-taxing advanced economies, the rate was 16.8%. The committee said, an RNR of anything beyond 15-15.5% will possibly result in a standard rate of about 19-21%, making India an outlier among comparable emerging economies.

The GST has the potential to make taxes more simple, raise compliance, and increase the GDP growth rate by about 1-2%. For instance, in Canada, the GST that replaced the federal manufacturers’ sales tax resulted in an increase in potential GDP by 1.4%. Therefore, as international experience shows, only a single-rate GST with a large base can transform the economy.

      Govt says need to have 4 GST rates; may reduce number later

The government believes there is no option for the country but to have four rates of the goods and services tax (GST), though in time it might look at reducing the number.

The ideal GST has just one rate or two. But senior functionaries of the finance ministry believe that a single rate, or two, would stoke inflation. And there is the task to protect the revenues of the Centre and the states. That is a combined ₹8.8 lakh crore, divided equally between the Centre and states.

As the rollout of the GST enters the home stretch, some have questioned the rationale of having four rates – 6%, 12%, 18% and 26%. There is also a zero rate, a rate of 4% on gold, a demerit rate on certain items such as alcohol and cigarettes, and a cess. That, say critics, defeats one of the purposes of the GST, which seeks to create a single market and simplify the current system mired in a plethora taxes.

A wide range of rates may lead to disputes over classification: which item or service should be taxed at what rate. For instance, should a refrigerator or a television be taxed at the same rate as air-conditioners? All three are consumer durables, but refrigerators and televisions are bought even by low-income groups, though air-conditioners remain toys of the relatively rich.

Whichever country has a high dependence on indirect taxes – India, where only a handful pay income tax, is largely dependent on indirect taxes such as sales tax, excise, and customs duties – the number of tax rates is large. European countries have a standard 20% GST rate, but two to three other rates. Nearly all of them tax alcohol, cigarettes, and petroleum products at a much higher rate.

But India, said the finance ministry functionaries, could not do without the four rates. “We have to have a 6% rate to protect the poor. There are many consumer items, such as edible oil and tea, on which there is no excise duty, only a value added tax. These are consumed in large volumes,” they said.

So, they should be in a slab lower than the 12% rate, which some wanted to be the standard rate. Putting them at zero will lead to a massive loss of revenue, and putting them at 12% will make them very expensive.

For India 18% is the standard slab. And then there is the 26% rate, which applies to most of the items – among them consumer durables and FMCG – which now have a total tax incidence of close to 30%, including excise and value-added tax.

Some officials expressed the hope that with time the 26% slab may become the one for demerit goods.

      NO THREAT TO TAX DATA, SAYS GSTN CHAIRMAN

Debunking criticism over equity structure of the company building world’s biggest tax system, GST-Network chairman Navin Kumar on Tuesday said all measures have been taken to protect sensitive tax information and the government will have strategic control over it.By keeping Goods and Services Tax Network (GSTN) private, the company has been equipped to take decisions quickly as an agile and nimble organisation not bound by red tape that can retain talent by paying market salaries, he told PTI.

Kumar insisted that enough firewalls and 8-levels of security is being built to keep the data safe. BJP leader Subramanian Swamy has questioned the structure of the entity created under the previous UPA regime saying how can a private firm be allowed access to “sensitive” tax information without security clearance.

   

                                                                                                                        From Sources:-

MOVING TOWARDS GST

        GSTN portal to start registration of 80 lakh assessees from Nov 8

        As many as 80 lakh assessees of excise as well as service tax and VAT can start migrating their registration to the Goods and Service Tax Network portal by November 8, GSTN chief executive Prakash Kumar said. "On this date (November 8), we are releasing enrollments. This means getting these existing eight million assessees on to our system," Kumar was quoted as saying by a PHDCCI release, report PTI. The GSTN, which is expected to provide common and shared IT infrastructure for GST implementation, will transfer on-board to its platform the details of about 80 lakh existing assessees of excise, value-added tax, customs and service tax. Kumar said the migration of assessee details onto the GSTN platform will sort out inconsistencies and help industry get ready for GST implementation date of April 1, 2017. "This move will help them do business without any hassle from April 1 next year, which is the likely GST implementation date," Kumar said. GSTN, a not-for-profit entity incorporated in March 2013, has been set up primarily to provide IT infrastructure and services to the central and state governments, taxpayers and other stakeholders for implementation of GST. It has also been allowed to partner with other agencies for creating an efficient and user-friendly GST eco-system. Kumar also said that GSTN will in the coming days obtain imports related data (Bill of Entry) from the Central Board of Excise Customs (CBEC). This will be useful for levy of iGST (GST levy on imports). The GST will subsume excise, service tax and other local levies and will make India one market for seamless transfer of goods and services. The GST Council, consisting of Union Finance Minister and his state counterparts, is likely to decide on the tax rates in their upcoming November meeting.

       Ex-finance minister PC terms multiple rate GST as “disastrous”

      The proposed multiple rate GST structure will be "disastrous" and nothing more than same old VAT rates in a "new shape", former finance minister P Chidambaram. "We sincerely hope that we do not misinterpret the design of standard, standard minus and plus rates of GST.We can have 20 rates. It will be disastrous and that cannot be GST, it will be fooling the country," Chidambaram told an interactive session with IIM Calcutta students on economic reforms, reports PTI. "A well designed GST is expected to have standard rate, plus and minus standard rate.That latitude interpreted to me as multiple rate - zero to 100 - that's not GST.That is simply existing VAT rates in a new shape, old wine in a new bottle," he said. He said he hoped better counsel would prevail which would reduce the number of rates to "three or so". The new Goods and Services Tax (GST) will subsume a number of indirect taxes at the state as well as central level and is targeted for rollout from April 1, 2017. About states disagreeing and joining the second wave of GST reform, Chidambaram said that even when UPA had implemented VAT, some had not joined initially and they had joined later, and so eventually all states will fall in line. "Whatever, be the standard rates it will raise service tax," he said. At the GST Council meeting last week, there was virtual consensus among states on imposing of the cess, which tax experts and industry have opposed vehemently, saying it defeats the very concept of one-nation, one-tax. Besides, a four-slab tax structure of 6, 12, 18 and 26 per cent with lower tariff for essential items and the highest bracket for luxury and sin goods also found favour with them but a decision was put off to the next meeting on November 3-4.

                                                                                                                        From Sources :-

HAZY ROAD

GST tax rate proposal “disappointing”

Vijay Kelkar, former finance secretary and chairman of the 13^th finance Commission on Friday said the recent proposal of the government to have a four rate slab for the Goods and Services Tax (GST) rate was “disappointing” as it “robs the GST of its efficiency enhancing potential”.

Kelkar said with the tax rate fixed by the GST Council, the growth impact on the economy will be only one fourth of the high potential impact that the 13^th Finance Commission had estimated. Apart from this, the proposed tax structure will lead to high compliance costs and classification disputes. Kelkar also said the next GST structure may lead to “potential slackening of tax efforts by the States as they have been promised 10 percent compensation of the shortfall”.

“ To me the approach outlined by the authorities signals a disappointing beginning which well could have been otherwise; a thundering take off to shock and awe the domestic and international community and capital markets,” said Kelkar while delivering the Shankar Aiyar Memorial Lecture in Chennai on fiscal Reforms in the Federal Framework.

“Growing adverse reactions due to the unfolding of these problems will, I am sure, persuade the authorities to change its approach and follow a path more like the one outlined by the 13^th Finance Commission and once again seize the initiative on stimulating growth and equity. I have no doubt that we will eventually move from one nation, one tax to one nation, one tax, one registration and one rate and I am sure this single rate will be closer to 12 percent” said Kelkar.

On fiscal federalism, Kelkar said if vertical and horizontal imbalances are not satisfactorily resolved, it can lead to political discontent that can threaten national security. Kelkar said India needs serious policy intervention to reduce regional disparities in per capita incomes between the most and the least developed regions of the country.

“for instance , in developed countries the ration of per-capita incomes between the most and least developed regions seldom exceeds 2, whereas in our case it can be a high 5 to 6…This issue too if kept unresolved can lead to a serious threat to Indian integrity. This is thus a fit case for serious fiscal policy intervention” said Kelkar.

Kelkar also said the governments should broaden the role of Niti Aayog and give it resources for giving grants to the lagging states and regions. This will help to attain growth acceleration and reduce developmental gap.

                                                                                                                        From Sources-:

HURDLES IN STEPPING STONES-PARMAR.....DPC

                                                    

Two petitions have been filed by officers of Mumbai Zone in Hon’ble Tribunal, Mumbai Bench seeking implementation of the directions of the Hon’ble Supreme Court in the case of N. R. Parmar & Ors. One of the petition is for implementing the same from 1981 onwards and the second from 1986 onwards. Both the petitions are pending before the Hon’ble Tribunal for hearing. After much hue and cry and subsequent stay granted by the Hon’ble Tribunal in Chennai in a petition filed by the officer of Chennai zone, the Board has vide letter 14.10.2016 has asked all the Cadre Controlling Authorities to confirm that the Seniority of DR and Promotees are revised in the same manner as interpreted by the Hon’ble Supreme Court in the case of N. R. Parmar & Ors V/s. UOI & Ors.  A report has been called for before 30.11.2016.

            Thereafter, a commotion has been started across the country, but reality is something else which needs a clear cut instruction from the Board categorically so that a fair Seniority List across all the zones can be prepared as well as incorporated in the AISL. The relevant OM is 1959 and subsequent OM is of 1986. Rota-quota system was from 1959, which was reversed by the various decisions of the Hon’ble Supreme Court by OM issued in 1986. Now, in CBDT and in Customs, revision of Seniority List was carried out. We in Excise are far behind as far as promotions are concerned, but our counterparts in CBDT and in Customs are far ahead. After their revision, we wakeup, but are still drowsy & unclear as to how to implement the same. Now, when mass scale promotions are expected, all have become active in this regard.

            In Oct-2014, promotions were carried out from Group ‘B’ to Group ‘A’, where officers of 1983 batch were covered. Now officers of 1984 batch onwards are expecting their promotions. In all our 16 zones, the Seniority Lists is not uniform. Neither the Associations nor the Board has shown any interest to have a uniform Seniority List without any infirmity.  In Kolkatta Zone, officers of 1984 batch have taken advantage of Parmar judgement and in Jaipur the officers have been granted notional promotions and Seniority have been revised.

            On examination of the recent letter of the Board dated 14.10.2016, it is seen that the Board has in casual manner directed the CCAs to implement the decision of the Hon’ble Supreme Court without giving any directions as to from which year the revisions are to be carried out and left it to the discretion of the CCAs, which will again result in confusion and unfairness and lack of uniformity. The Board was required to specify a year as to from which year the Seniority was to revised so that uniformity could be maintained, but the same has not been done. Presently, the AISL is being maintained by DGHRD and not by the Board.

             Going through the said directions, CESA Mumbai feels that the Seniority List is to be revised from 1981 onwards (as the Direct recruitment started from SSC from 1981 onwards ) as was done by CBDT.  Further, as the Board has in principle agreed to implement the Parmar Judgement, the officers will get the benefit from the date of Vaccancy, as shown in the advertisement, which means that the officers is entitled for financial benefit as well as ACP/ MACP as granted to Group ‘A’ officers.

                                                                                       DPC

           Chances of holding DPC on 25^th is bleak as there is neither any petition filed in Chennai Bench by the Administration of Chennai (for advancing the hearing date) nor any application filed for vacation of stay. As observed by the Chennai Court no reply from the Board is filed till date. Additional Solicitor General (Chennai)  is insisting for a reply as well as the latest instruction on the implementation of Parmar Judgement. No Bench is available on Saturday & Sunday. ASG is not available in Chennai on Monday & Tuesday i.e. 24^th & 25^th.  From 28^th Oct. onwards up to 11^th Nov., 2016, the bench will be closed due to vacation and the last week of the October, majority of the staff will be on leave due to Diwali vacation. Further, It is also learnt that the vigilance clearance and penalty statement in respect of eligible officers from one of the CCAs of the North Zone has not been received by DGHRD.

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NO MORE LTU UNDER GST REGIME

All eyes are fixed on today’s GST Council meeting. In the last meeting two states have raised the issue over Centralized Administrative control over the Service tax. All the issues have to be resolved in the ongoing three days GST Council meeting so that it can be placed before the Winter Session of Parliament.

All states are busy in projection of loss and compensation and safeguarding their interests. Definitely the current meeting of GST Council will be a mile stone in the History of Tax Regime if all the hurdles are cleared and issues resolved for rolling out GST as per schedule from next Fiscal year.

CESA Mumbai hopes that due to our concerted efforts and goodwill we will be able to control the situation and the base.

There are 300+ Assessees registered with 5 Large Tax Payer Unit all over the country. Delhi, Kolkata Administration is of the opinion that LTU should not be in their Administrative Control and on 14.10.2016 Chennai also expressed that LTU should not be there. However, Mumbai and Bangalore have favoured for LTU. We have requested that the Concept of LTU is not fitting in the LTU and hence it should be abolished for proper administrative control over the units and the trade will also not have any difficulty now.

The members of the steering Committee will meet shortly after Diwali, in the first week of November and will deliberate on structural and HR related issues.

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LARGE TAXPAYER UNITS TO BE SHUT DOWN UNDER GST REGIME 

After the Planning Commission, yet another UPA government relic is set to fall. Large Taxpayers Units (LTUs) scheme, a dream project of the UPA government, is set to be abolished with the introduction of Goods and Service Tax (GST).

CBEC documents on structural changes under GST, accessed by DNA Money, show that the single winker tax facilitator for large taxpayers, would be abolished a decade after it was form3e in 2006.

Some experts believe that LTUs failed to fulfill the expectation of large taxpayers. T.R. Rustagi, former joint secretary of ministry of finance said, "LTU was not a great success.  It would die its natural death with introduction of GST.

Some tax experts and former bureaucrats, however, supported the relevance of LTUs in GST regime. Sumit Dutt Majumdar, former chairman of Central Board of Excise and Customs (CBEC), said, “We must not abandon LTUs, Rather, we should extend the concept to STUs (Small Taxpayers Units) in the GST regime. And, as mentioned, it can have CGST and SGST authorities and income tax authorities as its constituents.

In the 2005-06 Budget speech, the then finance  Minister P Chidambaram said, “ As a measure of facilitation, I propose to follow international practice and establish LTUs. To begin with, these units will be set up in major cities. I would like to invite large taxpayers, whether of corporate tax or excise duties or service tax, to participate in the programme and avail of the single widow service.

However, LTUs could not give desired results on the ground. In January 2016, IT group Nascom raised administrative and operational difficulties in LTUs, suggesting their dismantling.

The American Chambers of Commerce in India too strongly reacted against credit transfer issue in LTUs.

PROPOSED ORGANISATION STRUCTURE UNDER GST

                                                                       In Nos

          GST Zones                                             24

          Large Taxpayers' Units                         0

          GST Commissionerates                    107

          GST Audit Commissionerates           53

          GST Commissioner (Appeal)             53     

          GST Divisions                                     535

  --  Curtesy sources

TOWARDS GST...

The Meeting with Board officials started on time. Hon’ble Member (P&V) apprised and removed all the apprehensions about reduction in staff at any level, and that Service Tax will remain in the domain of the centre and accordingly, the structure of the organization is in the process of being redesigned, so that all the staff can be placed without any displacements. The domain of the base will be expanded, so that in future there will be demand for staff according to the growth.
The delegates thanked the officials for the invitation in response to the Steering Committee communications as well as the proposed agitation programme. They all appealed that the concern and voice of the employees are being considered positively by the Administration. Hence, they assured that no one should worry and should not have any apprehensions. The unity of the CBEC is being felt and acknowledged and therefore it was appealed not to aggravate or precipitate the present mood of Administration which is conducive and caring towards its own employees. Therefore, it was appealed not to go in for agitation when the Administration is open and ready to resolve all the issues.

During the meeting with the Board officials, it was appealed to fill all the vacant posts, to which they readily agreed and it was assured that all the posts on promotions at respective zonal levels as well as at Board level will be done at the earliest.

As regards to the structure, it was urged that they should co-ordinate with the Chief Commissioners, with their proposals or submit independent proposal/s based on facts and figures, which will be studied with due care

As the outcome of the meeting was positive, it was unanimously agreed to defer the agitation programme and it was decided that during the lunch hours, the news of the deferment will be conveyed to all the employees in view of the positive developments. We welcome GST and it is our intention, as employees of the CBEC, to strengthen the hands of FM for a strong centre.

Snaps of the staff of Mumbai CX Zone-I being apprised about the positive developments and the deferring of the agitation programme is attached below...

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