Punjab Chief Minister Capt Amarinder Singh on Friday wrote to the Prime Minister Narendra Modi, suggesting the way forward on Goods and Services Tax (GST) 2.0 rollout, with 101 suggestions “to plug the gaps in GST 1.0 and alleviate the problems currently faced by businesses in its implementation”.
Capt Amarinder made several suggestions on improving GST revenues that should help Punjab narrow its revenue deficit, including higher rates of the State GST (SGST) than the Central GST (CGST) so that all states do not suffer such huge deficits.
Among others, Capt Amarinder suggested an amnesty scheme to overcome various aberrations that led to serious confusion in business circles in GST’s initial phase and “there is no need to continue with VAT legacy issues, which should find a sunset clause”.
Pointing out that India has dubious distinction of being amongst five countries in the world that have four or more non-zero GST rates, Capt Amarinder called for a single GST rate, “but it should include not more than two rates for any Chapter and not more than one rate at four-digit level of any chapter sub-heading. This will ensure harmonization of tax rate across similar supplies and avoid classification disputes besides opportunities to evade,” he said giving the example of different tax rates in various modes of transport.
Capt Amarinder suggested widening the GST net to include electricity, real estate and petroleum to make it a win-win situation for the States as well as businesses. Noting that electricity constitutes up to 30 percent of the cost of production in many key sectors and its exclusion from GST results in huge cascading of up to 10 percent, he pointed out that the present structure prefers coal-based polluting captive power plants of big industries over stand-alone power plants (many using natural gas) from where MSMEs source their power.
Underlining that MSMEs are facing the pinch after GST, he said that many States like Punjab lose a big chunk of revenue as the embedded taxes on these products are retained at source rather than at the place of consumption.
The Chief Minister also made many suggestions to remove embedded taxes in order to make Indian businesses competitive rather than benefitting imports over domestic production. Many other suggestions that will help to boost exports or provide level playing field to Indian industry vis-Ã -vis foreign counterparts, have also been made.
Besides addressing structural issues, penal matters, revenue enhancement as well as tax rates and exports-imports, the proposals include initiatives for simplification of the tax regime, issues relating to supply, input tax credits, valuation etc.
With increasing reliance on technology, Capt Amarinder gave various suggestions that should help move towards easy automation of processes and even a driverless environment in GST compliances based on algorithms. He has also strongly advocated wider trade consultations and constitution of a Council Secretariat on a permanent basis that could undertake informed studies on GST and help bring far greater certainty on key subjects.
CAPT CONGRATULATES MODI
Punjab Chief Minister Capt Amarinder Singh, in his letter to the Prime Minister Narendra Modi, congratulated him on his spectacular victory in the recent Lok Sabha elections.
At the same time, he welcomed the resolve expressed by the Prime Minister to move at a brisk pace to take the country on a trajectory of high growth and social justice.
Citing the high expectations of the people in Punjab, Capt Amarinder said that he looked forward to working with the Prime Minister to bring prosperity to the people India as well as the state.
Listing GST as a key challenge that should remain high on the new government’s agenda, the Chief Minister said that in its current form, the GST regime was choking the true potential of MSMEs by unnecessary restrictions on inter-state movement of goods “which should be liberated”.
He stressed that GST can easily be elected from fewer people without compromising the revenues while liberating millions of taxpayers from avoidable compliances.
Despite significant refinements in the recent past, GST continues to languish with many differentiators and exceptions in tax rates, unclear law, lukewarm revenues and high compliance costs, all of which act as barriers to economic growth, said the Chief Minister in his letter to Modi.