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Article:
1. Puja Mehra, Delhi-based journalist, discussed the complexity of the GST process in revenue collections.
Important facts:
1. After one year of its rollout the Goods and Services Tax (GST) revenue collections from the indirect regime are at the centre of a debate.
2. The recommendation for introducing a GST had first come in 2004 from a task force formed under economist Vijay Kelkar.
3. The present government has consulted Mr. Kelkar on the GST, but has not accepted his recommendations on an alternative IGST system compliant with global norms.
4. By these, the IGST would be simplified as a substitute for SGST in inter-State supplies, and exporters, while not subjected to the IGST, would be truly zero-rated.
5. The NITI Aayog, it seems, concurs with this proposal.
6. According to the author, the complexity of the GST process is hindering collections and diminishing potential economic benefits.
7. A member of the GST Council estimates a “shortfall” in the April-June quarter of this year.
8. SGST collections over the past several months have been consistently exceeding CGST collections.
9. In April, both CGST and SGST collections dropped and Integrated GST (IGST) collections took off sharply.
10. In each of the months since then, IGST collections have overshot CGST and SGST collections.
11. The reasons for the Centre’s GST collection falling behind that of the States are given below:
⦁ Insecure over loss of fiscal autonomy, the States succeeded in pressing a GST that is made of two types of levies, the CGST and the SGST.
⦁ The Constitution empowers the Centre to tax sales anywhere nationally, but it allows a State to collect taxes only on sales within its territory.
⦁ So, all 29 States and two Union Territories with legislatures have separately enacted their respective SGSTs.
⦁ The GST is being levied at the point of consumption, not the factory gate, unlike many of the levies it has subsumed.
⦁ Given the territorially limited tax jurisdictions of States, the collection of the SGST poses a problem every time goods and services get sold outside the State they were produced in.
⦁ IGST is imposed on inter-State sales.
⦁ On inter-State sales, the IGST, at a rate equal to the applicable CGST and SGST, is levied. This means, despite its national tax jurisdiction, the Centre has confined the levy of the CGST to intra-State sales.
⦁ A selling dealer in an exporting State collects the IGST from the buying dealer. The GSTN credits it to the IGST account.
⦁ To avoid exporting taxes, no GST is to be levied on exports out of India.
⦁ In practice, despite their GST-exempt status, exporters first pay the IGST and then it is refunded back to them.
⦁ Letters of undertaking or bonds can be submitted in lieu of IGST payments, but they increase exporters’ vulnerability to bureaucratic rent-seeking.
Way ahead:
⦁ The economic impact of the GST ought to be the focus.
