With all focus on the goods and services tax (GST) having now shifted to rules and specific rates, Revenue Secretary Hasmukh Adhia tells Dilasha Seth and Indivjal Dhasmana that multiple registration for companies will stay and that the GST Council may hold multiple meetings to take a call on fitment of rates. Edited excerpts:
While the government is saying the GST will be rolled out from July 1, the industry is demanding it be deferred to September 1, as it is not prepared. Is it possible to defer GST roll-out by two months?
That will be for the GST Council to decide. If the industry feels very strongly about it, let it write to us or to the states. We will take a view in the GST Council’s meeting. But as of now, we are ready for July 1. If the businesses have any difficulty with that (date), they should tell us. We will take it to the Council. The decision will be taken by the Council.
The GST Council will take up subordinate rules on Friday. There are worries related to multiple registration voiced by various sectors, including banks. Will those be addressed?
Ours will be a dually administered GST. States have not agreed to doing away with multiple registration. States have said unless every company registers with us and has an account with us, how do we know what is the amount of services they are giving in our state. This is the position of states, even at the officers’ level. The second argument of the states is that even if a company is operating at an all-India level for services, it can buy local level goods in states. Even a bank has value-added tax registration. So, what is the harm if they are registered for goods as well as services. Doing away with multiple registration is not possible. The problem with banks or big service sector operators is that if they provide intra-company supply between states, how would it be accounted for. So, there will be issue of valuation of that supply. They will have to probably keep a record of such transactions and issue vouchers. Rules on valuation will take care of that partly. Because we will not challenge valuation for intra-company supply.
There are also issues of input tax credit that unless the supplier has paid tax, input tax credit will not be given...
Dealers have to put all their sales invoices into the system by the 10th of next month. Once all dealers have done that, your purchase invoices would also be automatically uploaded. So, you will come to know that you have purchased from say 10 parties and nine of them have uploaded. If the remaining person does not do it, you can upload purchase invoice and we will still give you input credit. We will believe you. At the same time, a message will go to him that he has not paid, please pay. Now in a month if you can’t compel the supplier to pay the tax, only then your account will be reversed. You can snap ties with him. If he repeatedly does so, his compliance rating will go down. So, people will know he is an untrustworthy dealer who fails to pay the tax to the government.
By when will the committee take a call on fitment of rates?
The committee of officers will give a report to the Council before the next meeting, whenever it takes place - by the end of April or the middle of May. But it may take multiple meetings to take a final decision on that.
Will equated monthly instalments (EMIs) for under-construction houses attract GST, as a few reports state? And what about renting of commercial housing?
No way. Why should EMIs attract GST? EMI is just repayment of loan. Renting of commercial building will attract GST. Even today, there is service tax on it. So, the present dispensation will remain. Works contract will also attract GST.
There is a concern that the proposed GST is not one rate and one tax, but distorted GST. How genuine is this concern?
Finance minister Arun Jaitley made a very brilliant case in Parliament for multiple GST rates. Today if some high end commodity is attracting a tax rate of 30% and there is some item of consumption of the common man that is attracting 5% rate, an average will be 17.5% for the entire country. Do you think it will be a good system or a bad system of taxation? This will be highly regressive. Our present rates are like that. We are starting from an incomplete system, not an ideal one. If you still reduce rate on high end commodity, what will happen? And you put 17.5% rate on the item of mass consumption. That decision will be highly regressive in nature. So, it is not possible to have a single rate to begin with in a country like ours.
Finance minister Arun Jaitley said that the cess on cars will be at 12% to maintain the current tax incidence at 40%. Does it also hold true for soft drinks? Companies claim that their effective tax rate is around 34%, meaning a cess of 6% over 28% tax rate.
Our basic formula remains. Whatever is your present incidence of taxation, we will generally not disturb it, unless the Council consciously decides. If there is any deviation from the formula for whatever reason, GST Council will take a view.
Petroleum was taken in at zero rate but real estate is not included in GST. Why is there such a different treatment between the two sectors?
There was no consensus on real estate. Although Centre pushed for its inclusion, most states were not comfortable.
How many services be taken out of the current negative list under GST?
We are not going to change anything. Our attempt will be that the present exemption list of services continues under GST. We will take the exempted services to the Council for the approval. We do not plan to do any major reshuffle in the first year itself. Later, we can always withdraw it from the exemption list. Our first attempt will be to continue all the exemptions that are there in service tax now. We will try to take it to the council to get their approval. We do not want to unnecessarily upset everything.
Will emoluments not part of salary package given by employers to employee come under GST?
Yes, if it is a free of charge service beyond Rs 50,000, it will be taxable.This is only with respect to free gifts that are not part of salary package such as free insurance of free hospital treatment. These will be taxed.
Will GST paid on transportation for employees by employers get input tax credit?
GST paid on transportation cost for employees is not available for input tax credit under the law.
There is a tweak in the definition of agriculturists in the final bill compared to the draft. Will absentee farming, or landlords come under GST net?
There is no intention of taxing agriculture or agriculturist. It is all misapprehensions. There is no truth in this. We are not planning to tax any agriculturist. And the definition of agriculturist is given very clearly in the law. They are not supposed to be registered. Also, the exemption list will cover most of the products dealing with human consumption grown on the field. There will be a product wise exemption as well. According to the law, agriculturists need not register even if his income is more than Rs 20 lakh per annum.
Am I supposed to register if I am getting my land farmed through hired labourers?
Our definition says, whoever cultivates land through his own effort or the efforts of servants, or through labourers under personal supervision is called an agriculturist.
Will the proposed anti-profiteering body be a new institution or an existing body?
Both options are there. It will depend on the need based on how rampant is profiterering. The council will decide whether we give it to an existing body or a new body will be set up. Since it is a transient measure only for initial implementation, there may not be a need for a separate body.
But there are fears among companies that it will result in disputes and give rise to litigations?
I don’t think it will create much dispute. Most anti-profiteering will happen by way of natural competition. Most of the commodities are competition prone so no intervention will be needed. Another part will be taken care of by way of proper publicity by the government about the changes in the GST tax rate so that no consumer is cheated. Consumer education will be our first preference. Besides, competition will take care of it. There may be a few sectors where intervention of some authority will be required if here is rampant profiteering. But these will be very few cases.
Business Standard New Delhi,31st March 2017
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