By Tirthankara
On 28 February 2015, in course of his 2nd
Budget Speech, the Hon’ble Union Finance Minister declared that on and from 01
April 2016 GST (Goods and Services Tax) will be rolled out in the country. Since
the Central Excise & Service Tax offices are expecting to have a major role
in such dramatic developments, the buzz in the corridors of these offices is
growing since and curious eye-brows are raised seeking replies to a ‘How?’ The
queries are left unattended or replied back with a matching dance of eye-brows.
It is though not much difficult to appreciate the
silence. The only official communiqué available to the departmental officers is
a GST status report posted on the CBEC site (www.cbec.gov.in)
just two months back (dated 01/01/2015). (To be more truthful this status
report is an upgrade version of an earlier report posted in March last year.)
This report is not a mere statement on the GST
developments, while concluding it brings forth the role of CBEC in the scheme.
It states:
“8. The CBEC is expected to play an important role in the
drafting of GST law and procedures, particularly the CGST and IGST law, which
will be exclusive domain of the Centre. This apart, the CBEC would need to
prepare, in advance, for meeting the implementation challenges, which are quite
formidable. The number of taxpayers is likely to go up significantly. The
existing IT infrastructure of CBEC would need to be suitably scaled up to handle
such large volumes. Based on the legal provisions and procedure for GST, the
content of work-flow software such as ACES (Automated Central Excise &
Service Tax) would require review. Augmentation in human resources would be
necessary to handle such large number of taxpayers scattered across the length
and breadth of the country. Capacity building, particularly in the field of
Accountancy and Information Technology, for the departmental officers have to
be taken up in a big way.”
This
small paragraph, in fact gives some specific points which CBEC (i) is expected
to do, (ii) would need to prepare, (iii) would need to scale up, or points
which (iv) would require review, (v) would be necessary, and (vi) have to be
taken up. These points are:
1.
Drafting of CGST
& IGST laws,
2.
Meeting formidable
implementation challenges,
3.
Updating IT
infrastructure due to increased number of taxpayers,
4.
Reviewing content of
workflow software (ACES),
5.
Augmenting human
resources, and
6.
Capacity building of
officers in the fields of Accountancy and Information Technology.
The above content thus depicts that the apex body
for central indirect taxes itself is yet to get a clear sense of things
happening/ will happen, and we don’t need to walk far to find the reason behind
the prevailing confusion on GST in the department. Moreover, the status report
apparently being silent on some major issues further fuels apprehensions.
First, the report is totally silent about a major
GST institution viz. GSTN, a private limited company set-up by the government in
2013 as a special purpose vehicle (SPV), primarily to provide IT infrastructure
and services to the Central and State Governments, tax payers and other
stakeholders for implementation of the Goods and Services Tax (GST).
It appears from the reports available, that the
government intends GST administration to have simpler control mechanism. While
the mainframe will be administered by the GST Council (GSTC, a body similar to
present Empowered Committee), IT infrastructure will be taken care of by the
GSTN. The CBEC, as things stand today may only play a supporting role. That be
so, the future of CBEC and its employees will remain much dependant on the work
of these bodies, and shall have to abide to the decisions taken there.
Second, despite references to Empowered Committee,
it does not reflect some major developments/ decisions taken there even when
such reports are available in the public domain. Specific reference may be
drawn to a long standing expectation (reflected in the status report also) that
number of taxpayers/ assessees for CBEC would swell from the present 25-26
lakhs (manufacturers, dealers and service providers) to above 60 lakhs under
the GST regime.
Yes, under present conditions and projected
threshold of Rs. 10 lakhs (turnover), GST will have a sufficiently large tax
base and the number of taxpayers would still be above 60 lakhs. But, and this
is a very big ‘but’, as per reports published in leading national newspapers,
and we quote from Economic Times:
“As
per their recommendation, GST would not be imposed on businesses with an annual
turnover of less than Rs.10 lakh. Currently, the threshold for Value Added Tax
(VAT) is Rs.10 lakh in most states.
On
the vexed issue of dual control of traders by both the union as well as state
governments, the states recommended that they be given legal powers to collect
tax from businesses with an annual turnover of up to Rs. 1.5 crore. Those with
below the turnover threshold of Rs. 1.5 crore would pay their taxes to states,
which would subsequently pass on to the Centre its share.”
(Report:
21 October 2014)
If this demand of the states is accepted and if
report from some independent researchers, which indicate status quo in
administrative control of ‘traders’ and ‘service providers’ by the centre and
the state does not come true for turnovers upto Rs. 1.5 Crore, all taxpayers
whose annual turnover would fall between Rs. 10 lakhs to Rs. 1.5 crores will be
within administrative and legal control of the states. If that be so, the
majority (more than 90%) of service tax assessees will go out of CBEC control
and the total assessee/ assessable returns number will reduce drastically to be
around 5-6 lakhs and instead of augmentation, retrenchment will be looming
large for CBEC.
Thus post GST we are having three sets of
possibilities as far as taxpayer base for the department is concerned.
Possibility 1. Turnover threshold for GST is fixed at Rs. 10
lakhs/ annum and centre gets responsibility to look after entire CGST and IGST
collections. Expected tax base would be more than 60 lakhs. As things stand
today, this is least possible among options.
Possibility 2. Turnover threshold for GST is fixed at Rs. 10
lakhs/ annum. Centre continues to look after CGST, IGST and SGST collections
for services upto annual turnover of Rs. 1.5 Crore, while states continue to
look after SGST, CGST and IGST collections for traders falling within Rs. 10
lakhs – Rs. 1.5 Crore annual turnovers. Expected tax base increases marginally
due to addition of big traders (those above Rs. 1.5 Crore turnovers). This
seems most practical at the initial phase.
Possibility 3. Turnover threshold for GST is fixed at Rs. 10
lakhs/ annum. States are given responsibility to look after SGST, CGST and IGST
collections for all businesses falling within Rs. 10 lakhs – Rs. 1.5 Crore
annual turnovers. Expected tax base reduces drastically. This does not seem
practical especially in the initial phase, but if a decision is taken to have
single interaction point for small taxpayers, it may prevail.
In any of the above situation with introduction of
single registration and single return under GST, the department would have to
go through another reorganization exercise; the specific situation would only
determine the magnitude.
Meanwhile opinions be formed on the direction of
such reorganization.
