Industry chambers meet Adhia, discuss model GST law

Ficci flagged provisions relating to mandatory pre-deposit for filing appeals and restrictions imposed on availing input tax credit

Raising concerns over the model goods and services tax (GST) law, industry chambers on Friday sought more clarity on various issues such as dual administrative control, discretionary power of tax authorities and taxation of electricity.

At a meeting with Revenue Secretary Hasmukh Adhia, representatives from chambers suggested that terms like 'location of suppliers', 'location of recipient', 'intra- state and inter-state sales' should be clearly defined.

During the meeting attended by the Federation of Indian Chambers of Commerce & Industry (Ficci), the Confederation of Indian Industry and the Assocham, participants expressed fears that temporary non-inclusion of petroleum products could jack up costs, as the industry will not be able to claim tax credit.

"Some of the issues raised by Ficci include dual administrative control vested with both the Centre and states, wide discretionary powers given to tax authorities and potential of probable disputes due to separate valuation mechanism prescribed for related party transactions," it said.

Also, provisions relating to mandatory pre-deposit for filing appeals and restrictions imposed on availing input tax credit were flagged by Ficci.

The chamber suggested that provisions which may lead to unwarranted disputes in future may be given a re-look before finalising the law.

The meeting is part of the exercise by the revenue department to consult stakeholders and fine-tune GST legislation. The government is planning to roll out the new indirect tax regime from April 1, 2017.

Assocham, in its representation, said that non-inclusion of electricity will lead to significant economic distortions.

On petroleum products, it said the industry will operate under hybrid tax regime and will be unable to claim GST credit due to temporary non-inclusion of five petro products that could increase costs. Similar would be the fate of the alcohol industry.

"Consequently, some thinking around zero rating or concessional taxation under existing law on the inputs for these industries is warranted," Assocham suggested.

The model GST law does not have provisions dealing in supplies to special economic zone (SEZ), it said, adding that consequential amendments are needed to be made in the SEZ Act.

On real estate, it said the draft GST legislation should provide abatement of the value of land for levy of GST.

The GST Constitutional Amendment Bill was passed by Parliament earlier this month and so far three states — Assam, Bihar and Jharkhand — have ratified the Bill.

After the Bill is ratified by at least 16 states, Parliament will have to pass two legislations — CGST and IGST — detailing the new tax code. This could happen in the winter session of Parliament in November. Similar tax law SGST will also have to be passed by the states.