Industry representatives, during a meeting with Revenue Secretary Hasmukh Adhia over the last few days, raised concerns about the proposed Goods and Services Tax (GST) regime, particularly relating to electricity, petroleum, and real estate sectors.
“There is no restrictive covenant under the CAB (Constitutional Amendment Bill) seeking to exclude levy of GST on electricity unlike in the case of alcohol and petroleum products,” according to a statement issued by Assocham after the meeting. “Contrary to this, the Central Government’s view before Rajya Sabha Select Committee on GST indicates that inclusion of electricity is not envisaged in GST. Non-inclusion of electricity will lead to significant economic distortions.”
“Some of the issues raised before the Revenue Secretary on the provisions emanating from the model GST law included dual administrative control vested with both Centre and State, wide discretionary powers given to the tax authorities, provisions relating to mandatory pre-deposit for filing appeals, restrictions imposed on availing input tax credit, potential of probable disputes due to separate valuation mechanism prescribed for related party transactions, etc,” according to industry body FICCI.
Zero-rating
Similarly, industry is concerned about the shoring up of costs that would occur in the petroleum industry due to their inability to claim GST credit as petro-products are temporarily not included in that system.
“Consequently, some thinking around zero-rating or concessional taxation under existing law on the inputs for these industries is warranted,” the Assocham statement added.
Cascading effect
The industry representatives also said that the proposed GST setup would lead to a cascading of taxes, and they also proposed a method to avoid this.
“The draft GST legislation provides that transaction value would include all taxes other than CGST, SGST and IGST,” the statement said. “This would lead to a tax on tax scenario. To avoid tax cascading, transaction value should be valued net of any taxes.”