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Excise, VAT exempted goods by states should be GST exempt: India Inc
September, 05th 2016

India Inc on Tuesday proposed that goods fully exempted from excise duty and VAT by states should be categorised as exempted goods in the GST regime, which is likely to be implemented after a minimum of six months from the date of adoption of the GST law by the GST Council.

"Goods fully exempted from the levy of excise duty and VAT by all the states be categorised as exempted goods in the GST regime as well," Federation of Indian Chambers of Commerce and Industry (FICCI) said in a release following a meeting here with the Empowered Committee of State Finance Ministers on the Goods and Services Tax.

"Goods chargeable to nil rate of excise duty but charged to VAT in most states could be identified for levying a merit rate of GST. All other goods (except jewellery and demerit goods) could be subjected to the standard rate," the statement said.

"As per current indications and reports, goods will be categorised as being subject to merit rates (12 per cent), standard rates (18 per cent) and de-merit rates (40 per cent). Certain goods will be exempt from GST while bullion and jewellery would be charged to 1 per cent/2 per cent," FICCI added regarding classification of goods for applying GST rates.

Industry chamber CII (Confederation of Indian Industry) addressing the Empowered Committee hoped that the GST rate would be kept at 18 per cent.

"GST is a game-changer for India. We hope that the standard tax rate would be kept at a reasonable level of 18 per cent which would greatly contribute to growth, employment and incomes, and boost Indian industry's global competitiveness," Chandrajit Banerjee, Director General, CII said.

Ficci suggested that with a view to check inflation and check the tendency to evade taxes "the merit rate should be lower and the standard rate should be reasonable".

On implementing GST, FICCI said that in order to provide adequate time to trade and industry to prepare "for a hassle-free roll out of the GST regime", a minimum of six months time should be permitted from the date of the adoption of the GST Law by the GST Council.

"Additional time would be required in case the GST Law as passed by parliament or state legislatures is significantly different from the one adopted by the GST Council," FICCI said.

FICCI also requested the empowered committee that certain existing exemptions such as the area based exemptions under excise legislation and incentives under states' industrial policies should be converted into an effective, non-discretionary tax refund mechanism.

The industry body further recommended that valuation provisions under GST, which is a transaction based tax, should give primacy to actual transaction value.

"Valuation provisions under the draft GST laws are reflection of valuation laws of a single point tax like excise duty. Wide powers have been given under the draft GST laws to authorities to reject declared transaction value," the statement said.

CII President Naushad Forbes said that GST Law should provide for seamless movement of goods without any rigid administrative requirements that will delay transit and add to costs.

"There should be a foolproof mechanism of movement of goods between states and a single registration process, and industry should not be subjected to dual administration of assessment, audit, etc both by the Centre and states," Forbes said.

In a meeting here with Revenue Secretary Hasmukh Adhia earlier in August, Indian industry chambers had raised concerns on the draft GST law, flagging issues like dual administrative control and wide discretionary powers for tax authorities.

"Provisions may lead to unwarranted disputes in future so it requested to give a re-look at the law before finalising," a FICCI representative told reporters here after the meeting.

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