PROPOSED ADMINISTRATION OF GST (PART-I)

[Dr. Sanjiv Agarwal]

Considering the federal structure of India, there will be two components of GST – Central GST (CGST) and State GST (SGST). Both Centre and States will     simultaneously levy GST across the value chain. Tax will be levied on every supply   of goods and services. Centre would levy and collect Central Goods and Services Tax (CGST), and States would levy and collect the State Goods and Services Tax (SGST) on all transactions within a State. The input tax credit of CGST would be available for discharging the CGST liability on the output at each stage. Similarly, the    credit of SGST paid on inputs would be allowed for paying the SGST on output. No cross utilization of credit would be permitted. On inter-state transactions including imports, integrated GST (IGST) shall be levied and collected in lieu of CGST and SGST.

Both the levels of Government have distinct responsibilities to perform according to the division of  powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism. Since India will follow dual model of GST and there will be three types of GST, i.e., Central GST (IGST), Integrated GST (IGST) and State GST (SGST), according to the present scheme of law, Centre will levy and administer CGST & IGST while respective states will levy and administer SGST.

As per Article 279A of the amended Constitution, GST Council will be a joint forum of the centre and the states. As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws, principles that govern Place of Supply, threshold limits, GST rates including the floor rates with bands, special rates for raising additional resources during natural calamities/disasters, special provisions for certain States, etc.

Its residual entry specifies any other matter relating to GST, as the Council may decide. Also, in terms of clause (6) of the Article 279A, while discharging the functions conferred by article 249A, the Goods and Services Tax Council shall be  guided by the need for a harmonised structure of goods and services tax and for the development of a harmonised national market for goods and services.

Though the role of GST Council shall be recommendatory, its recommendations will carry a weight due to participation of centre and all states. According to the proposed administrative model, GST Council and proposed Central Board of Indirect Taxes shall work closely at the helm for administration of GST in India.

Based on proposed model of organization under GST, following changes are expected -

• The administration structure post GST would be based on the principle of pooled sovereignty, mutual co-operation, cross reporting, meaningful control.
• The entire number of existing assesses, proposed increase of assesses, future growth etc., may be taken into consideration while arriving at the hierarchy of administration. It is suggested that a combination of, number of assesses and the geographical area, would be required to divide the area as the number of assesses in metros/cities would be more whereas in the villages, area would be the criterion. This is required so that the assesses are served near their places. This may be on the lines of de-limitation exercise.
• The theme of mutual cooperation is tried for the first time and it would be a huge benefit.
• The interaction between Zonal Chief Commissioner and Commissioner SGST would bring confidence to the State Governments in Centre and be real co-operative federalism.
• The responsibility and role of NACEN, DG Audit, DGRMC, DGITI should increase to bring credibility, smooth implementation, compliance verification for the department and trade as well. The traditional division structure of scrutiny should be replaced with audit and scrutiny. There shall be mutual exchange of intelligence and joint audit if agreed by the state.
• There shall be a working arrangement wherein if the issue has monetary implication of ₹ 5 Lakhs or the amount as fixed by the GST Council , and if the issue is non-recurrent for the assessee, then the decision of the Commissioner Appeals in such cases should be accepted even if it is not in favour of the department and with the no precedence value.
• This exercise will also result in re-distribution of manpower and further this re-distribution shall be done in most transparent manner keeping in view of the talent, potential and skill sets of the staff.
• With this exercise, the infrastructure and vehicle issue to be re-considered in a fresh perspective rather than a traditional "penny wise pound foolish attitude"
• The reason for making the Regional head as the cadre controlling authority is the wide jurisdiction which enables every staff's requirement/need to be fulfilled and further will help in meaningful re­distribution.

Since India is a federal State with Union Government and various State Governments, GST will usher in a new formula of pooled sovereign powers wherein both, centre and states will jointly administer the GST law which will include harmonization of tax base, tax rates, tax administration and tax compliances / enforcement.

It is expected that GST shall be administered under the overall supervision and control of Union Finance Minister who is also the Chairman of the GST Council constituted under Article 279A of the Amended Constitution. The present Board, i.e, Central Board of Excise and Customs (CBEC) is likely to be replaced by a new Board called Central Board of Indirect Taxes (CBIT)

The new proposed Board for Indirect Taxes, i.e Central Board of Indirect Taxes (CBIT) is expected to be headed by a Chairman and with six or more members. The number of members would be flexible. In addition to Additional Secretary Revenue, as Member Secretary of GSTC, Member GST shall also be the Member Secretary to  the GST Council for CGST and IGST related issues. Board through Member-GST     may be the think tank to assist the Council in policy formulation in CGST and IGST      matters.

The members may have different portfolios such as –

• Member, GST (Secretary, GST Council )
• Member,  Customs
• Member, (IT, Policy & Infra)
• Member, Central Excise & Legacy Issues
• Member, P & V, Training
• Member, (P & J, Audit)

Member (GST) will also act as Secretary to GST Council. Principal Chief Commissioners  / DGITI or Anti-Evasion Directorate / Principal Secretaries of States may report to Member (GST). Member GST interaction with Principal Secretaries of States would be purely for operational requirements such as reports, data collection, joint action, pre-consultation for GST Council meeting etc. It is expected that it will strengthen cooperative federalism and will provide a platform for better coordination between Centre and States.

DGCEI will be rechristened as DGITI (Directorate General of Indirect Tax Intelligence). In GST regime, the tax base is bound to increase manifold. The  challenge would be to provide maximum facilitation, and at the same time ensure optimum compliance. In this context, the role of DGITI would be of paramount significance. It would be the country's premier intelligence agency to handle economic frauds and offences related to taxation.

DGITI will have a pan India presence. The organisation shall be headed by an officer of DG rank. Every state should have regional units headed by ADG rank  officer. Officers, having expertise in VAT laws, from state administration may be deputed to DGITI.

(To be continued ........)

Discussions to this article

[Ganeshan Kalyani]

With these proposed changes it seems that there no changes as such on part of assessment and its procedure . the only plus point a dealer can take out is the number of authority which they were to deal with during VAT would come down in GST . and rest process of assessment etc is going to remain same.