"A single rate GST unlikely for now"

Hasmukh Adhia, Revenue Secretary, responded by e-mail to questions from Puja Mehra on the Goods and Services Tax.

Edited excerpts:

From what we have heard so far, the GST doesn’t really seem like a “one nation, one tax.” Isn’t it true that there won’t be a single national tax across states and goods and services and instead a central tax plus 29 state taxes? Plus, in all probability, cesses by States and the Centre approved by the GST council?

It is not correct to say that GST is not “one nation one tax.” The taxes which are already slated to be subsumed in GST are more than 10 in number. These taxes include - excise duty, VAT, service tax, additional excise duty, CVD, a special additional duty of customs, entertainment tax, luxury tax, octroi, entry tax, purchase tax, taxes on lottery, betting and gambling etc. Also, it is not true to say that there will be one tax of the Government of India and 29 different taxes of different States.

A person has to pay only one GST Tax — a portion of which will automatically go to the State concerned and a portion will go to the Central Government. In the case of inter-state movement of goods, the share of SGST will automatically transfer to the consuming State even if the transaction has taken place in more than three-four States. Regarding the cesses, it is yet to be decided by the GST Council and so it may be too premature to predict which all cesses will still remain. On the whole, it is going to be a huge simplification in taxation regime.

What will stop the States or Centre from imposing cesses? Will they have to seek the GST Council’s approval? Will the GST Council’s decision be binding?

The powers of the State and Centre to levy taxes are clearly defined in the Constitution. These powers are rearranged in the Constitutional Amendment Bill. The State or the Centre cannot impose taxes other than for which specific powers are available. For example, other than GST the powers of taxation which now remain with States are excise as well as VAT on potable alcohol, VAT on petroleum products i.e. crude oil, natural gas, LNG, petrol and diesel, stamp duty on property transactions. Even though GST Council’s decision is recommendatory in nature no State will be able to arbitrarily levy any cess or taxes because that might attract the ire of GST Council which can take that State to Dispute Resolution Mechanism.

Will it be possible for GST to be collected also on Indian Railways tickets that currently attract a service tax of about 15 per cent, and other user charges that are currently tax-exempt?

Railways currently attract a service tax of 4.5 per cent (after abatement of 70 per cent). What rate it will attract in GST regime is to be decided by GST Council. Toll charges are at present in negative list for service tax. For GST, a decision will have to be taken.

How much lower is the 2013-14 tax base (on the basis of which the CEA had given his RNR and standard GST rate recommendations) from the current one?

We will have to recalculate the taxes base of State and Centre as per the latest figures available. I would not be able to give any estimate how much will be the difference between 2013-14 figures and the latest figures.

Has the CEA been asked to revise his recommendations?

The Committee chaired by CEA has already given their recommendations. Now it is for the Government and GST Council to take further decisions based on the NIPFP Report and report of Committee chaired by CEA.

If states don’t agree to 2-4 per cent GST on gold, as recommended by the CEA, won’t the burden of higher standard GST rates fall on poor people, who don’t consume gold as much?

The decision on the rate of taxation for gold jewellery will have to be taken by the GST Council. Apart from the desirability of putting a higher tax on jewellery, which is an item of consumption for the rich, it is also an item which is prone to tax evasion, being a very high-value item.

The incentive to not report the transactions in order to avoid higher taxation will be higher if the tax rate on jewellery is very high.

Can GST be a game-changer unless applied to a comprehensive base at moderate rates?