Chambers point out ambiguity in GST Bills

Chambers point out ambiguity in GST Bills

Assocham says non-inclusion of electricity will lead to significant economic distortions

Industry chambers met Revenue Secretary Hasmukh Adhia and pointed out certain loopholes in the draft model goods and services (GST) law and the constitution amendment Bill on the new indirect taxation regime such as ambiguity over exclusion of electricity from GST.

An Assocham delegation, comprising Anita Rastogi, partner Indirect Tax PricewaterhouseCoopers, pointed out that since entry 53 of List II of the Seventh Schedule of the Constitution of India has not been deleted by the constitution amendment Bill, there is no restrictive covenant under the Bill seeking to exclude levy of GST on electricity unlike in the case of alcohol, petroleum products. However, contrary to this, the Centre's view before the Rajya Sabha Select Committee on GST indicates that inclusion of electricity is not envisaged in GST.

The chamber said non-inclusion of electricity will lead to significant economic distortions. The delegation also said the petroleum industry will operate under hybrid tax regime and inability to claim GST credit due to temporary non-inclusion of five petro products could shore up costs. Similar would be the fate of alcohol industry. 

Consequently, some thinking around zero rating or concessional taxation under existing law on the inputs for these industries is warranted, it said.

Further, input tax credit is not available for inputs or services utilised in the construction of immovable property. As such, tax paid on inputs or input services would become a cost for the builders, it said.

The chamber further said the proposed GST Council would provide a ‘mechanism’ to resolve disputes. The word mechanism connotes procedures. If there is an infraction between two constitutional bodies, whether jurisdictional issues in such situation currently covered under Article 131 will be subservient to mechanism adopted by the GST Council, it wondered.

Also, the entry 92A and 92B of List I of the Seventh Schedule of the Constitution dealing with taxes on inter-state trade is retained. Moreover, the Central Sales Tax Act, 1956 has not been repealed. Thus, it appears that the Centre continues to have the power to levy CST on inter-State sales.

"Is it an oversight?" the chamber asked. CST currently imposed at the rate of two per cent in inter-state sale of goods is expected to go once GST is rolled out.

Ficci raised the issues of dual administrative control vested with both the Centre and states through discretionary powers given to the tax authorities, provisions relating to mandatory pre-deposit for filing appeals, restrictions imposed on availing input tax credit, and potential of probable disputes due to separate valuation mechanism prescribed for related party transactions.

Ficci requested the secretary that provisions which might lead to unwarranted disputes in future might be given a re-look before finalising the law.

Adhia has been meeting various stakeholders over draft model GST law, which has been put in the public domain.

Separately, Indian Cellular Association urged the government to retain the duty differential between imported products and domestic ones.

It said there was an approximate 200 per cent growth in mobile handset manufacturing activity in India in value terms during 2015-16 over 2014-15 due to the differential. "Over 35 new mobile handset manufacturing plants have so far been established generating employment for approx. 50,000 people directly and 90,000 indirectly," the association said.

Business Standard, New Delhi, 20 August 2016