Industry favours GST, but opposes dual mode

Indian industry is of the view that the proposed Goods and Services Tax (GST) will be beneficial for the economy, but the deadline of April 1, 2010, is not realistic, a leading consulting firm said in its survey.

About 97 per cent of those surveyed agreed it would benefit the economy, but most of them were not in favour of a dual GST at the Centre and the state levels. The respondents agreed that the implementation of GST would warrant re-engineering of the business model and supply chain.

“More than two-thirds of respondents are not in favour of a dual GST. About 75 per cent of respondents for telecom, transport and logistics segments are not in its favour…. In addition, the possibility that a few states may not join the GST bandwagon presents an area of concern,” the Deloitte survey said.

State finance ministers, at a meeting last week, had also expressed their apprehension on the April 2010 deadline, though they were not against the GST in principle.

The 304 respondents, which represented different sectors such as manufacturing, trading and services across the country, were divided over the extension of GST to products of conspicuous consumption that attract high tax rate, continuation of existing and fresh incentives or the manner of availability of tax credit on capital goods.

Prashant Deshpande, senior director (indirect tax), Deloitte, said: “The most significant point to note in the survey, not entirely unexpected, is the view that the appropriate date for GST introduction is April 2011. This clearly points toward the perception of lack of preparedness on the part of trade and industry and of the government.”

About 90 per cent of the respondents wanted the entry tax/octroi levy to be subsumed in GST. More than 75 per cent wanted the existing tax incentives to continue and favoured fresh tax incentives for thrust areas under GST. Around 60 per cent favoured pre-paid GST mechanism on inter-state supplies, but wanted the continuation of declaration form mechanism to track stock transfer without payment of tax.