AN INTERVIEW WITH
GST EXPERT CA SUDHIR HALAKHANDI
GOODS AND SERVICES TAX HOW IT WILL BE INTRODUCED - THE
EXPECTATIONS, THE COMPLEXITIES AND HURDELS
CERTIANLY WE ARE MISSING THE DEADLINE
|
In
2006 the then finance Minister Mr. P. Chidambaram in his budget speech
declared that Goods and service tax will be introduced from 1st. April
2010 and the dead line is coming near and near. We have with us eminent GST expert CA Sudhir Halakhandi and
we are asking him about his views about the dead line of 1st April
2010, the expectation of tax payers, the discussion paper on GST and further
the developments with respect to this tax after 2006 and specially after
release of discussion paper on GST by the empowered committee of state
Finance Minister -CA Rakesh Sethi, B.Com, FCA, DISA- Chairman
Ajmer Branch of ICAI |
CA RAKESH SETHI
Good Morning Mr.
Sudhir! So your study on GST is going on continuously. Let us first how your
interest in GST developed at initial stage.
CA SUDHIR HALAKHANDI
I am attached with VAT
since 2003 and also with service tax since 1994 and you know GST is the
extension of VAT hence the interest in GST is natural.
CA RAKESH SETHI
And then came your
primer on GST – Goods and service tax –
An introductory study?
CA SUDHIR HALAKHANDI
Yes it was published in
April 2007 issue of ICAI CA Journal but it was written by me in 2006 when
erstwhile Finance Minister Mr. P. Chidambaram declared that there is a
consensus about National level GST and I was surprised with his statement
because in the present federal system how somebody can say that we have
consensus on National level GST and in that article I explained that What is
GST and why National GST can not be introduced in India.
CA RAKESH SETHI
Now we are at the verge
of deadline of 1st. April 2010 what your opinion about meeting this
deadline is?
CA SUDHIR HALAKHANDI
First of all I am
making it clear that the dead line was fixed by the then Finance Minister Mr.
P. Chidambaram about the National level GST and now there is no question of
introducing National GST. So clearly there is no question about meeting the dead
line. You can reproduce the relevant extract from the Budget speech of 2006.
CA RAKESH SETHI
Yes, I am reproducing here the extracts of
Budget speech (2006-07) of Mr. Chidambaram for the benefit of the readers:-
155. It is my sense that there is a large consensus that the country
should move towards a national level Goods and Services Tax (GST) that
should be shared between the Centre and the States. I propose that we set April
1, 2010 as the date for introducing GST. World over, goods and services attract
the same rate of tax. That is the foundation of a GST. People must get used to
the idea of a GST.
Mr. Sudhir You are right again
in 2007-08 the same finance Minister
repeated his statement about National
Level GST , I am also reproducing
the same here:-
116. I wish to record my deep appreciation of the spirit of
cooperative federalism displayed by State Governments and especially their
Finance Ministers. At my request, the Empowered Committee of State Finance
Ministers has agreed to work with the Central Government to prepare a roadmap
for introducing a national level Goods and Services Tax (GST) with
effect from April 1, 2010.
Agreed that we are not
receiving what we have been promised i.e. the National level GST But now whatever
may be the form of GST i.e. the dual GST as declared in the discussion paper
and as practically approved by the Central Government, tell something about
it’s meeting the deadline.
CA SUDHIR HALAKHANDI
The finance Minister
Mr. Pranab Mukharjee himself has told that GST is not coming on 1st. April 2010 so the answer of your
question is clearly replied by the Hon. Finance Minister himself.
CA RAKESH SETHI
But there is a
statement of Dr. Asim Das Gupta about meeting the deadline and he told that GST
is coming on 1st. April 2010.
CA SUDHIR HALAKHANDI
See everybody is
playing his own role. Dr. Asim Das Gupta can be described as the “Father of VAT” in India and in that
capacity he has done a very good job but in case of GST the issues are
different and even in case of dual GST states have to settle some vital issues
with the centre hence Dr. Asim Das Gupta may have his reasons for sticking to
the date but circumstances are not favoring his statement. But his statement is
few days old.
CA RAKESH SETHI
Is there really very
big difference between introduction of VAT and GST?
CA SUDHIR HALAKHANDI
Yes, See VAT was
introduced phase wise in India. First in 2003 in Haryana then in 2005 in 20 or
21 states and in 2006 in 5 or 6 states
etc but in case of GST, in my opinion
it has to be introduced in all the states simultaneously and if any
compromise is made on this basic issue then it will further distort the already
distorted GST. Some of the states have already expressed there reservation
about the deadline.
Further in case of VAT, no Constitional
amendments were needed but GST can only be introduced after making
constitutional amendments with respect to center’s right to tax the sale of goods
and state’s right to tax the services coupled with state’s right to tax the
import of goods.
CA RAKESH SETHI
What are the major
differences and issues still to be settled between states and the centre?
CA SUDHIR HALAKHANDI
The basic issue is of
rate of tax. The 13th Finance commission has recommended 12% rate
i.e. 7 % for the SGST and 5% for the CGST but now states are demanding 15%
instead of 12%. Further states have suggested dual rate – a lower rate for
essentials and higher rate for luxuries but centre is in favour of single rate.
Recently the prime Minister’s advisory
council has also shown it’s favour for single rate. Recently National school of
public finance and policy has suggested 17% rate of tax which seems to be much
higher than the rate of 12% suggested by 13th Finance Commission.
CA RAKESH SETHI
How do you visualize
this scenario?
CA SUDHIR HALAKHANDI
Very amazing!!! There
is very much difference in 12% and 15% and further 17% and here see how they
will settle on single rate? See the rate of tax (VAT) on Food grains and major
agricultural products is 4% in most of the states and in case of interstate
transactions the effective rate is only 2% and these items are out of the scope
of Central Excise and in these circumstances how you can tax them 7% (with CGST
exemption) and 12% (without GGST Exemption) from present rate of 2% or 4% ?
There are so many commodities of this type so how they will handle and
compromise on this issue is a very big question.
CA RAKESH SETHI
I think the second
biggest issue is threshold under CGST?
CA SUDHIR HALAKHANDI
Yes, it is also a big
issue and in my opinion much bigger than rate of GST. The states have suggested
that the threshold under CGST will be Rs. 1.50 Crores which equal to the
threshold under central excise. This will be a very comfortable position but
centre is not agree on this threshold of Rs. 1.50 crores and suggested Rs. 10
Lakhs as CGST threshold.
This is a huge
difference and see if the threshold is
Rs. 1.50 cores than most of the VAT
dealers, who are at present out of the Central Excise will be out of the
central GST also but if the threshold is Rs. 10 Lakhs only, then these dealers
will have to get them registered under the CGST.
Once it appeared after
release of discussion paper by the Empowered committee of State Finance
Minister that the matter of threshold has been sort out in very practical and
amicable way but now differences on this vital issue are coming out and now
this threshold matter is also another big issue.
CA RAKESH SETHI
Any other Issues?
CA SUDHIR HALAKHANDI
Yes, Tax on alcohol and
purchase tax matter are also issue of differences but these can be settled with
some minor compromises but the rate and threshold issues can only be settled
through long deliberation and compromises and exemptions but you know more the
compromises and exemptions , more we will loose the benefit of real GST.
CA RAKESH SETHI
Something about IGST
Model?
CA SUDHIR HALAKHANDI
The thrust of GST is to
make the indirect tax system purely consumer based tax system and to that
extent it is OK but it is little bit complicated so some simplifications are
needed and further since it is part of discussion paper hence must have got the
consent of major producing and exporting (state to state) states like
Maharashtra, Gujrat, Andhra Pradesh etc and if these states are agree on this
system then it is a big achievement of the empowered committee of state finance
ministers.
CA RAKESH SETHI
How the major issues like
threshold and rate of GST will finally be settled?
CA SUDHIR HALAKHANDI
These are major issues
and can only be settled on the table but the process is cumbersome because
first states amongst them have to be agreed on vital issues since it appears that
even after release of discussion paper there seems to be some differences. Certainly it will take time and also needs
some of the compromises from both the sides but since the news reports are
coming are only single sided so
certainly they have to start real negotiations on these matters.
CA RAKESH SETHI
And what about the reports about the
increased revenue figures?
CA SUDHIR HALAKHANDI
Yes but these estimates
are too early and far from realities and one may assume them as unrealistic targets.
See still exemption list is not final; there is a difference on threshold limit
and on rate of tax then how we can comment on these estimates.
CA RAKESH SETHI
Any Comment on the work
still done on the GST by the Government agencies.
CA SUDHIR HALAKHANDI
They all the experts
and working very well but in the last one month so many contradictory
statements are coming and these should be minimized. I am daily analyzing the News reports and can say that they all
from top to middle level working towards it but there is a lack of coordination
but you can not blame anybody for it because there are differences on basic
issues as I mentioned above hence proper coordination can only be started after
their settlement.
CA RAKESH SETHI
Nice talk with you Mr.
Sudhir!! Thanks a lot for giving you valuable opinion on GST to me and to our
esteemed readers.
CA SUDHIR HALAKHANDI
Thanks and lot for
calling me.
END