India Inc seeks 18 per cent GST rate

New Delhi: India Inc on Tuesday lobbied for 18 per cent as standard rate under the GST, saying it would generate adequate tax buoyancy without fuelling inflation.

Industry also demanded relaxation in the penal provisions under the GST.
After the passage of GST constitutional amendment by Parliament, the empowered group of state finance ministers met with various industry groups on Tuesday to understand their concerns as it started discussion on GST rate.

E-commerce companies demanded that they should be kept out of the proposed GST net as they only provide a ‘platform’ to vendors and customers and do not make money out of the sales.

However, the state finance ministers didn’t seemed impressed with their demand as they questioned how on-line firms which enjoy multi-billion valuations could be exempt from GST.

Chairman of Empowered committee of state finance ministers and West Bengal Finance minister Amit Mitra pointed out that  consumers buying products online pay VAT, producer pays excise duty but e-retailers go untaxed on the pretext that the transaction is just a pass-through.

“E-commerce brings in competition, but you are also adding some value. Else how are your companies generating so much valuation?”said Mr Mitra. He said the discussions so far have concluded that the e-commerce sector is generating millions of dollar, but pay practically no taxes. On their part e-retailers said their source of revenue is advertisement on which they pay service tax.

Various industry associations have already met with the revenue secretary and other  finance ministry officials to express their apprehensions on GST. During the interaction industry indicated that it will be tough to meet the April 1, 2017, deadline for roll out of GST as they need sufficient time to put in place the IT infrastructure.

“We believe a maximum rate of 18 per cent as standard rate will be revenue neutral and ensure adequate tax buoyancy. “Also the centre has agreed for full 5-year compensation for revenue loss to states, so 18 per cent rate will be more than adequate,” CII President Naushad Forbes said.

Wholesale traders represented by Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal demanded that first three years from the date of implementation of GST should be declared as ‘transition period’ and penal provisions should not be taken against any trader for clerical or procedural mistakes.

The apex industry chamber Ficci pointed out that the proposed GST legislation requires a service provider operating in various states to obtain registration in each state.

“This will increase the compliance burden manifold considering that each taxpayer (company) will have to file three returns per month and an annual return for each registration. Business entities will be engaged only in filing returns rather than concentrating on their business,” said Ficci.