|
| Now negative list for goods tax |
| Sukumar Mukhopadhyay / Sep 12, 2011, 00:42 IST |
|
Now that the negative list for the service tax is out, though a tentative one, for public consideration and evaluation,the next logical thing that should happen to complete the structure of the whole new regime of goods and services tax is that the government should come out with a tentative negative list for goods tax .
The GST will be a combination of central excise duty, sales tax (now VAT) and service tax along with other small duties. The goods tax will consist of a combination of central excise duty and sales tax. The designing if the goods tax and the negative list will have have to take into account the following considerations.
First, the concept of manufacture which is the only feature of central excise tax will have to be expanded to combine with the concept of sale which is feature of sales tax. Here the expression feature refers to the taxable event . In excise it is the act of manufacture while in sales tax it is the act of sale. The difference is critical for the new goods tax. Had it been only the goods under excise law, it would be only the manufactured goods but when we combine it with the sales tax, even unmanufactured goods would be taxed. Specifically speaking, live animals such as horses or dogs or paddy would not be charged to excise duty but they will be charged to sales tax. Thus the goods tax would tax everything whenever there is sale. This will make a lot of difference to the existing judicial pronouncements about the definition of manufacture. There are many judgments which have termed many goods such as wastes for some metals depending on the content of metals as not manufactured and thus not chargeable to duty.
But they will come under the purview of tax when the goods tax is a combination of excise duty and sales tax.
Manufacture will meet its demise or extinction being irrelevant. It will be relevant only if there is a reference to a manufactured goods in the negative list which should not be there. Complicated questions such who is the manufacturer will vanish. Whoever sells will be liable to pay the goods tax and also service tax.
Second, the exemptions not only in the excise tariff but also in the sales tax (VAT) tariff will have to be included in the negative list. Many exemptions on the excise side are geographical which need to be abolished to make a seamless GST.
There are also exemptions based on actual user condition. They are called conditional exemptions . These conditions will have to be abolished. The government should avail of this opportunity to abolish most of the exemptions which had been given earlier due to lobbying.
Thirdly the Cenvat Rules need to be combined with the rules on the sales tax side for giving input tax credit. This will be the best opportunity to abolish the distinction between capital goods and raw materials.
Fourthly, this will be the time for abolishing the law of unjust enrichment. The state laws on sales tax do not have such law while it is there on the central excise side. It will be good time to end this vicious law.
Lastly,the rates of duty on goods and services must be the same. If there is a lower slab,say, 4 per cent for basic and primary goods like paddy, food etc., and a higher rate, say, 12 per cent for all other goods, it must be same for goods and services.
Otherwise it will create the difficulty of distinguishing between goods and services. The basic simplification in the tax regime for which GST is being conceived, cannot be achieved without this critical feature of same rate for goods and services.
Conclusion is that a combined goods and services tax will provide ample opportunity to do away with the present day complexities of defining manufacture, manufacturer, capital goods, raw materials, unjust enrichment, distinguishing between goods and services or giving conditional exemptions. But a conscious effort has to be made towards that design which must be revealed in the next paper on negative list of goods tax.
smukher2000@yahoo.com
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
Content Guide
