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Goods and Service Tax fear haunts state tax officials
June, 20th 2014

With the Centre proposing to introduce the indirect Goods and Service Tax (GST) in the state replacing all existing Central and state taxes, the state Commercial Tax Department fears curtailment of its powers.

At the same time, the GST also plans to cover over 77 commercial services that has not been taxed so far.

“The GST will replace most other indirect taxes and harmonise the tax rates on manufactured goods and services. At present, the effective tax rate on services is 10.3 per cent, while that on manufactured goods works out to 20 per cent. Though the GST rate has not been decided it is likely to be around 15 per cent. So the tax on manufactured goods could go down while that on services could go up,” said Mr K.R. Suryana-rayan, the president of the All India Confederation of Commercial Taxes Assoc-iations (AICCTA). “As a result, commercial services like spa which costs Rs 10,000 or more, that are not being taxed at present, and airway services would be taxed once GST comes into force,” he added.

Though GST would simplify the taxation system and will benefit the corporate sector and traders, what the common man is likely to gain is still not known.

Tax expert Vijay Kumar said, “If manufacturers pass on benefits to consumers, the tax burden will come down.” He said that for consumers to benefit from the GST system, the government should set up a commission to protect the interests of consumers as it was done in Australia when it introduced GST in 2000. If tax rates go up, it ensured that consumers were not charged more than what is necessary. Meanwhile, the officers of the state commercial tax department said that GST will curtail the state’s power to take decisions.

The state which now has the right to take decisions on bringing changes and implementing VAT will lose its powers. Instead, a change needs to be okayed by the Committee of State Finance Ministers.

The AICCTA member met the Arun Jaitley on Friday to explain the possible curtailment of their existing power and functions in VAT regime, once the GST regime of indirect taxation is introduced.

The AICCTA sought division of jurisdiction between state VAT departments and Cenral Board of Excise Customs (CBEC) in a way that the new system should not prove disadvantageous to State TAX departments.

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