The senior officials of the central excise department have prepared a report on some major loopholes in the Goods and Services Tax (GST) as sought by the Union government to fine tune and improve the law. The report would be submitted to the concerned ministry in a week.
“We have raised some key points and specific areas of concerns which need to be looked into,” said a senior tax official of the central excise department.
In its draft report, tax officials have expressed apprehension on the definition of ‘supply’ which is believed to be extremely wide and intends to cover almost all kind of transactions. “In the current draft, there is no clarity on such transactions and about its administration which could lead to a dispute and lot of litigations,” said the official cited above.
He further explained that Section 3 of model GST Law (model law) specifies the meaning and scope of term ‘supply’ which includes all forms of supply of goods/services such as sale, transfer, barter, exchange, license, rental, lease etc. This means anything an assessee changes whether it’s ownership, custody of any kind of goods and services would attract GST.
Another troubling provision relates to ‘valuation’ of taxablesupply of goods and services, which may again create room for confusion and disputes, said another tax official. Under the GST regime, specific additions have been made to the price charged. Such additions include value of goods/services supplied free or at concessional rates by the recipient to the supplier. For instance, if a doctor or a lawyer offers services free of cost or a company offers a ‘buy one-get one free’ kind schemes would be under the tax net.
If the values of these supplies are to be included in the taxable supplies by the service provider, an amount that is already taxed would once again attract taxation, added official.
The report also highlighted the lacuna on the part of ‘input tax credit’, another important area which needs to be revisited, noted the official. The GST law provides for credit of GST paid on all the inputs, except on some items. The exceptions or ineligible credit criteria is quite subjective in nature. For example, services in relation to food/drink, outdoor catering and membership of clubs are restricted when used mainly for personal use of employees. The officials fears that if the loophole remains it could lead to massive tax evasion.
According to tax experts, the administration of GST has to be sorted out, and if it is not resolved, it may significantly dent the ease of doing business. “It is giving dual responsibility to both central and state as far as adjudication and assessment are concerned. The GST Council was unable to reach a consensus on who would administer and who would assess the transactions as it is going to be dual control. Now if each of the authorities comes up with its own assessment then it is going to be lots of harassment on the assessee,” said Prajakta Menezes, principal associate (indirect tax), Khaitan & Co. source http://www.business-standard.com/
Free Education Guide on Goods & Service Tax (GST)