Shield for Aam Aadmi in GST?
The government could consider an anti-profiteering clause to ensure the benefits of the goods and services tax (GST) are passed on to consumers and prices don’t spike once the levy is rolled out, Finance Minister Arun Jaitley said. The matter will have to be discussed in the GST Council if it comes up as a subject for debate, he said.
“We are still far from that kind of thinking,“ Jaitley told reporters on Thursday , a day after the Rajya Sabha approved the constitutional amendment that will pave the way for GST.“If that thinking comes within the council, then we will have to consider it.“ The council will comprise representatives of the Centre and states and will decide on all critical aspects of GST, including the rate structure and relevant legislation.
Malaysia, which adopted GST in 2015, introduced an anti-profiteering law besides intensifying enforcement through its National Pricing Council to protect consumers and ensure businesses didn’t take undue advantage of the levy to charge more and make excessive profits.
With some countries having seen a rise in inflation after switching over to GST, Malaysia has been treading with caution. Following the RS vote, the discussion has shifted to what the rate should be and whether it will be easy on the pocket. “Some provision like the law brought in by Malaysia to ensure that profiteering does not take away the advantage of GST from consumers is needed,“ said SD Mazumder, former chairman of the Central Board of Excise and Customs (CBEC). “Also, stringent monitoring would be required to ensure that the benefit of lower taxation is reaching the common man.“
Some don’t think it’s a good idea.“This will entail detailed audit of financial data of companies and would lead to avoidable disputes,“ said Pratik Jain, partner and leader, indirect tax, PwC India. “Instead, the government should focus on engaging with industry so that they understand the benefits of input credits and pass on the benefit to consumers.“
The government is hoping for an April 1 rollout, but much remains to be done before the levy can be implemented. GST will help end the cascading of taxes and possibly result in lower levies besides simplifying processes. Companies should be able to save on logistics, protect themselves better from imports and optimise operations, all of which should lead to reduced prices. In the long run, the tax rate will come down and with that, the price of many goods, Jaitley said.
“Currently, what the taxpayers are paying is phenomenally much higher,“ he said. “For almost 60 to 70% of the commodities on a weighted average, you are paying 27% plus a large number of other small taxes. In some instances, states say it’s even higher at 30-32% or more.“
STATE FM’S PANEL FOR LOWER RATE
The guiding principle laid out by the empowered committee of state finance ministers is that this rate has to come down, he said. “It will gradually slide down, but even in the first instance it will come down. That’s the clear intention that they have expressed.“
This will have to be married with the second intent -that states get enough money for their development. “Developmental activities of states are also in larger public interest,“ he said. “Curtailing them will certainly not help the common man. So a balance between the two will always have to be maintained by the GST Council,“ he said, arguing for a middle ground against the Congress view on keeping GST as low as possible to protect consumers.
“I think what you need is an optimum rate,“ Jaitley said.
Asked about a possible rise in the levy on services when GST is in place, he said it would depend on two factors -the standard rate and what the GST Council will decide on service tax. There has been some discussion about having some key services at the threshold or lower rate and others at the standard rate. GST will have a three-slab structure with most goods and services at the standard rate in the middle. A lower rate will be imposed on essential items to protect the poor and a higher rate on luxury items. That’s why successive governments have been gradually raising service tax. “Because, one of the intentions was, besides revenue raising, that it should start converging towards the GST rate,“ he said. The minister pointed out that the previous government had raised it to 12% from 10%, then it had gone up to 14%, and with cesses added, it has become about 15%. “So it has moved up…The difference between the rate and the possible rate which will eventually be fixed has relatively narrowed down,“ he said. – www.economictimes.indiatimes.com [05-08-2016]