GST Bill Provision to Arrest Industrialists Sparks Fears

The CII chief suggested that the government should shame companies if lower taxes are not passed on to customers.

The Confederation of Indian Industry (CII) has voiced its concerns over the penal clauses included in the Model Goods and Services Tax Bill.

CII President Naushad Forbes, sharing the dais with Finance Minister Arun Jaitley at the Vibrant Gujarat Summit, listed two key concerns for industry.

First, there is a provision to arrest an industrialist for non-bailable offences, which covers five different potential offences. The tax laws provide for only one offence, that is, if you collect taxes and do not pass it on to the government. The second, there are clauses at present in the draft (Bill) about profiteering, if reduction in taxes are not passed on to the customers. 

Naushad Forbes, President, CII

“We believe the best way to control a firm is to have an independent firm to scrutinise the process and be accountable only to the GST Council. But even if it one needs these provisions, can they be made quite simple and transparent such that there isn’t scope for discretion and scope left for harassment?” Forbes said.

Instead of resorting to penal clauses, the Indian government could look to adopt a model followed in Australia wherein authorities shame companies if lower taxes are not passed on to the customers, Forbes said.

However, companies are ready to adopt GST as soon as the rules are finalised, the CII president said, adding that the indirect tax regime is likely to add 1.5-2 percent to India’s GDP once implemented.

Meanwhile, Finance Minister Arun Jaitley reiterated that GST, coupled with the government's demonetisation drive, will ensure better tax compliance.

Despite the slim chances of meeting the 1 April deadline for implementing the GST, Revenue Secretary Hasmukh Adhia said the government would maintain that as the target date for implementation of the new indirect tax regime. Adhia evaded specific concerns voiced by industry participants and spoke instead about the simpler and more transparent tax payment structure under GST.

Invoices will be matched between the buyer and the seller through an automated system under the GST Network. There is a computerised automatic system to manage returns and this software can do exact matching.

Hasmukh Adhia, Revenue Secretary

Forbes agreed that the proposed tax structure was simpler and more transparent but emphasised on the need for a single window registration process. The government is likely to miss the 1 April, 2017 mark, but the new regime should be in place by 1 July, he added.

(This article was originally published here.)