Redoing laws for the GST regime

The government has introduced a Taxation Laws (Amendment) Bill in the Lok Sabha, to amend the Customs Act, 1962; the Customs Tariff Act, 1975; the Central Excise Act, 1944; the Finance Act, 2001; and, the Finance Act, 2005. And, to repeal certain enactments. The idea is to ensure these changes when the Goods and Services Tax (GST) laws come into force.

The Customs Act will be amended to include 'warehouse' in the definition of ‘Customs area’, to ensure an importer would not be required to pay the proposed Integrated GST at the time of removal of goods from a Customs station to a bonded warehouse. And, provisions are to be inserted in the said Act for mandating the furnishing of information by specified persons in respect of import or export of goods, on the lines of the Income Tax Act, the Central Excise Act and some other laws.

The Customs Tariff Act is to be amended to enable the levy of GST compensation cess and Integrated GST on imported goods, including valuation thereof. The aim is a level playing field for domestic business vis-à-vis imported goods.

Consequent to the proposed repeal of the Central Excise Tariff Act of 1985, vide the Central GST Bill, a new Schedule, the Fourth, is proposed to be inserted in the Central Excise Act. It will provide for classification and duty rates for specified excisable goods -- petroleum crude, motor spirit (petrol), high speed diesel, aviation turbine fuel and natural gas, tobacco and tobacco products. These are presently covered under Chapters 24 and 27 of the Central Excise Tariff Act. And, will continue to attract central excise duty even after the GST commencement.

Some consequential amendments are proposed in the Central Excise Act. These relate to certain definitions, changes in sections, provisions of deemed manufacture and insertion of emergency powers to increase the rate of duty, on the same lines as provided in the Central Excise Tariff Act, 1985.

After GST introduction, the cesses or surcharges levied or collected as duties under central excise on excisable goods or as service tax on taxable services would become irrelevant. For, the supplies of such goods (except petroleum products, tobacco, etc) and services would be chargeable to GST. So, the Bill proposes to abolish such cesses or surcharge; also, the cess levied on water consumed by certain industries and by local authorities.

The trade now has a better idea on how the introduction of GST would affect some of the other laws. The government should take forward this initiative and propose amendments to other legislation, such as those applicable to Special Economic Zones.

The government should also inform exporters on whether the various promotion schemes for them would be impacted under GST. Top finance ministry officials have talked of the need to allow seamless flow of credit under the GST regime. And, hence, the need to not allow any upfront exemptions. Whether this reasoning will find expression in export promotion schemes must be urgently made clear. That will help exporters prepare for the GST regime.  

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