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GST passed, doubts remain

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  2 April 2017 12:00 AM GMT

The promised rollout of goods and services tax (GST) by July 1 this year seems to be right on schedule, with the four GST bills clearing Parliament. However, controversy continued to dog the issue with opposition parties taking strong exception to its passage as Money Bill. This came after the Rajya Sabha, where the ruling NDA is decidedly in minority, adopted five amendments put up by the Congress and the CPI(M). The Lok Sabha, where the NDA is in overwhelming majority, rejected the amendments and passed the GST bills in origil form. The Opposition’s grouse was that the rendra Modi government is using the tactic of clothing up controversial legislations as money bills and getting these passed in Lok Sabha after bypassing the Rajya Sabha. Several opposition party MPs and prominent citizens even wrote to Vice President Hamid Ansari, venting their grievance. In this particular case, they alleged that the government was slipping in about 40 amendments to existing laws in the GST bills. Of particular concern were the proposals to make Aadhaar card mandatory for filing income tax returns, lowering the cap on maximum cash transaction from Rs 3 lakh to Rs 2 lakh, giving the Central government powers over several tribuls in appointment and removal and in checking the activities of charities, empowering Income-Tax officials to conduct raids without citing reasons, and removing the cap on anonymous dotions by corporates to political parties. In the government’s defence, Fince Minister Arun jaitley reminded the Congress that Aaadhar is a UPA initiative which Prime Minister Modi has embraced, that strong firewalls can be built to prevent hacking rather than discrediting the technology wholesale. He said no taxman can start searching without a ‘satisfaction note’ made available to the assessee, that the government should not be barred from checking if charitable organisations were really doing charity as these organisations take land from government and claim exemptions. Regarding political funding, Jaitley argued that the rules are not being changed to benefit the ruling party, that a political party will have one declared bank account, that total dotions to the party through ‘electoral bonds’ will be known as the bank will be notified. “This will also be good for small parties as people will dote without fear of consequences,” he said.
The government’s overall defence that ‘non-fincial matters’ can be included in Money Bills since the law allows it, will doubtless be debated in various quarters in the coming days. But for common people, the GST bills touted as a ‘game changer in the indirect tax regime that will unify the country economically’ — are still befuddling. After all, GST will subsume a plethora of indirect taxes levied by the Centre and the states like excise duty, value added tax, service tax, entry tax, entertainment and luxury taxes and others besides. But in its fil form now, the GST law will bring about at least five tax slabs 5, 12, 18, 28 and zero percent, a far cry from the slogan ‘one country, one tax’. The Centre and the States, after protracted rounds of negotiation and much political wrangling, may have given up their old autonomy in collecting indirect taxes, but how they coordite on the ground in the new revenue sharing model remains to be seen. The GST council has struck a compromise on the ‘control’ issue, with 90 percent of assessees with annual turnover of Rs 1.5 crore or less to be assessed by states and the rest by the Centre, while those with turnover above Rs 1.5 crore will be assessed equally by the states and the Centre. However, the system will have to be fine-tuned if the turnover of the assessee increases or decreases from one year to the next. There are worries that the new tax rates under GST may fuel inflation in the short run, and consumers will be short-changed if high prices remain stuck. There are also questions regarding the tax payment software, as well as how effectively the government can check profiteering by companies unwilling to pass reduced GST rates to consumers. All these doubts must be cleared up by the government soon, if buyers and sellers are to negotiate the new system smoothly in the coming days.

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