Dec 01, 2016 09:39 PM IST | Source: CNBC-TV18

Road to GST: Dual control, cess still debatable, say experts

The goods and services tax (GST) council will meet tomorrow to discuss changes suggested by several states in the model GST law and compensation formula.

The Goods and Services Tax (GST) Council will meet on Friday to discuss changes suggested by several states in the model GST law and compensation formula.

In conversation with CNBC-TV18, experts talk about the various hurdles the GST council will face in the meet tomorrow.

Pratik Jain of PwC India, said on the dual control there still may be debate and dispute. It will be difficult to see a resolution among the states, said Jain. He added that levying of cess under GST is not a good idea.

He also noted two concerns other than cess. First, anti-profiteering, as it is complex to administer and second, the manner of taxation of the service sector.

"New definition of 'intangible goods' creates confusion," said Sachin Menon of KPMG.

Giving a positive outlook, Uday Pimprikar, Partner-Tax, EY, said that there are some gaps in the GST draft, but it’s moving in the right direction.

Below is the verbatim transcript of Pratik Jain, Uday Pimprikar and Sachin Menon's interview to Shereen Bhan on CNBC-TV18.

Q: You just heard what Dr Mitra had to say, there was an informal meeting of state finance ministers on November 20 which was inconclusive the draft laws are now open for public comments. Given the fact that demonetisation wasn’t factored into compensation claims so on and so forth, are you still hopeful that we could see a breakthrough in this session of parliament?

Jain: My heart says that it should be, but my mind say it may not I think it is going to be difficult to my mind. In next couple of days they have to decide on the draft laws and on the dual control issue. I think that on dual control issue there could still be debate and disputes. I don’t think they have still worked out a model as of now, but if the draft laws are passed and that presented to the parliament, the government doesn’t need opposition to get it passed right now - - so hoping against hope, we are hoping that tomorrow and day after at least the draft laws will be approved by the council and it will be presented to the parliament in this session.

Q: Let me give you the final say, Pratik has put the anti-profiteering clause on the table as something that the government may want to review or the GST council may want to review and also he believes that some of the earlier issues that we had to deal with services have not been resolved yet either?

Menon: Yes, what I am finding is that whatever representations are made by various industry associations where which could have been accommodated within the revised draft which was perhaps not done. Many of the provisions are amended and at the same time some of the new provision brought in which is creating more confusion. For example now earlier it was very clear intangible was falling under the service definition. Now the revised definition is deleted that word of intangible and whether it is design or default this kind of inclusion or exclusions which are otherwise giving you a positive clarification is removed.

Q: What would you like to put on table on the issues that should be addressed by the goods and services tax (GST) council to ensure that we do have a much more robust law?

Pimprikar: I like to possibly comment on the earlier question one; one is that this entire experiment that we are kind of going through as a GST council requires a huge amount of cooperation between the central state governments and between the state governments inter se and occasions like this will keep on coming up and how does GST council deal with this occasions it will be interesting to see.

This is the epitome of cooperation between all governments and I am very much kind of interested in understanding what happens in the next couple of days, but that aside on the law itself I would think that there are some positives in terms of some amount of clarity that has been brought in, in some of the provisions. There are some for example the treatment of imports and in case of imports, the imports would be liable to a tax under the customs legislation, but even in that particular provision this should have possibly aligned the liability to pay IGST for all transactions related where even the underlying matter is a product or a good to the import. So, there are some bits of gaps even there but one can see the intention, one can see the movement towards those kind of provisions and it at least appears that the movement is towards right direction.

Having said that there are certain other provisions that have been included which could have been easily avoided and those are actually replications of provisions which are existing in the service tax law. I don\\'t think that there was really a requirement to suddenly come up with a provision which deals with international transactions differently related to the place of supply vis-à-vis domestic supplies. The present law under service tax has a major problem. Again as an example and as illustration present law is a major problem on the treatment of international ocean freight and the industry is crying horse saying that this kind of a levy and today service tax was made applicable in the last six months on import ocean freight. And that actually amounts to double taxation on the same amount by the central government. Because that particular amount gets liable to charged on a customs duty. So, those kind of things were clearly avoidable.
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