From what Union Finance Minister and Chairman of Empowered Committee of State Finance Ministers have given to understand after their recent meeting, it is clear that the Government is quite serious about ushering in GST in 2010 April. This is just one budget away. But what is singularly lacking so far is any positive information about the exact nature of GST and the road map to achieving it. Therefore, the seminars that are taking place and the articles that are being published by analysts and experts are more like conjectures and refutations. So we do hope that the Budget takes account of the following suggestions.
(a) Make it public whether it will be a dual GST or one single GST. The Govern-ment has never made a formal announcement on this. Also consider that the Chairman of the thirtee-nth Finance Commission (which is charged with asse-ssing the impact of GST on the fiscal position of all units of the Federation) in his convocation address on 6th February 2009 has bargained for a “grand bargain” between the units of the Indian Federation. That is to say, that the Commission is arguing for one single national GST. So in this Budget the position must be clarified once for all.
(b) If dual GST, this Bud-get should indicate whether the State GST will also include service tax. If that is so the independent economists, analysts and Chambers of Commerce and Industry will get opportunity to argue out the consequences of such a decision. It is pertinent to note that some Federations and Confederations of Industry and Trade do not favour the service tax to come to the States. In fact, there will be very many problems if service tax is put on the Concurrent List of the Constitution. In any case an amendment of the Constitution to this effect will have to be carried out which needs time and therefore a precise clarify on this point must be indicated in this Budget.
(c) If it is a dual GST, then at the Central level (that is for Cenvat and service tax) several important decisions must be taken in this Budget. It has to be decided whether the existing Excise Act and Service Tax law will continue as they are or they are to be abolished and merged into a new law combining both excise and service tax. If a new law has to be made it will be conceptually a stupendous problem to have to accommodate two different taxable events namely the act of manufacture and the act of providing service in one combined Act which may have to be called Central GST Act.
There will be no special advantage in merging the two Acts if the taxable events remain separate.
The Acts can remain independent as now while Central GST can be achieved if the Government introduces (i) common rate of duty such as 10% for excise and service tax both, (ii) comprehensive goods tax with a separate negative list where input tax credit will not be allowed (iii) a comprehensive service tax with a separate list of those which will not be charged to service tax and (iv) harmonises the machinery sections of both the Acts.
(d) Budget should allow different thresholds for excise (Rs 1.5 crore) and service tax (Rs 10 lakh) as they are now since it will be difficult to bridge gap which can be done gradually. Many cou-ntries have such different thresholds.
Conclusion: People must know what form of GST is in store for them. This Budget must remove the shroud of secrecy and uncertainty about the Government’s intentions.