The proposed G.S.T. to be introduced from the next year 01-04-2011 has to solve the concerns of the tax payers. The general opinion of the tax payer is only those who are in the organized sectors are paying they will be questioned, and high rates of taxes are collected from them. But those who are in the unorganized sector are the unpaid and will not be covered. The unorganized sector will increase due to high rate of taxes. Our history shows that whenever the rates of taxes are low and reasonable, the high taxes could be collected. It is the intention of the tax payer which depends upon the market conditions, competitions, which makes him to pay the taxes more than the administration which implements the tax legislations. More dependence on indirect taxes always leads to inflation which multiplies the tax burden on consumers.
Therefore the following issues to be covered before the new G.S.T. tax regime started implementation:
1. Rates of Taxes : The high rates of taxes always leads to high evasion. The gap between the tax evasion and tax payment should be minimum. The tax payer should feel the pinch for not paying the taxes and the honest tax payers should be protected and respected. It is proposed to have 12 % as basic rate of tax under G.S.T. But this rate is very high rate. The proposed rates should not be more than 5% of the consumer price to attract more tax compliance. Other wise the unorganized sector will develop which challenges the real economy.
2. Tax Credits : All indirect taxes paid earlier has to be given credit before levying the tax @5% of the consumer price. It means the ultimate indirect tax paid by the consumer should not increase beyond 5% of the price. Some of the taxes are still proposed to be continued which should not be allowed. The G.S.T. should cover all indirect taxes. There should not be any other indirect tax other than G.S.T.
3. Inter State Transfers : It is a serous concern and cause more disputes among the State. The taxes on inter state transfers has to be in more encouraging for both the manufacturing state and the marketing state. It can be uniform transfer percentage of consumer price. It can be 10% of consumer price as margin for the marketing state and the tax for the balance price can be collected by the manufacturing state.
4. Tax Base : The tax base should be widened and to cover all sections of the market irrespective nature of the market where they carry on their business. The tax base can be widened with the help of Cross verifications with various raw material suppliers, traders, departments, lending institutions, expenditure spent for carrying on their business, their living style. Transporters informations etc,. More and more information should be collected and cross verifications should be made compulsory. Nobody should be uncovered. More and more tax payers and more and more tax collections.
5. Legislature : It should be only one Act and one tax. But the tax can be shared by both the Central and the States preferably 1/3 for Central and 2/3 for States out of the states tax collections. The states has to implement the legislature prescribed tax rates and administration. The States should not be given free hand without the interference of the Central Govt. Whatever the Rulings has to be given by the Central only which has to be implemented by the States compulsorily. This step leads to uniformity and clarity among the tax payers and encourages more and more tax compliances.
6. Administration : The administration can be in the hands of the States only. Which gives more and more encouragement to the States to be independent economically otherwise they has to depend upon the Central which leads to burden on Central Govt. and causes disputes.
7. Inflation : With increase in indirect taxes burden, the prices of all commodities will increase and have multiple effect due to increase of cost of transportation, storage etc., Therefore more dependence on indirect taxes is not advisable in the interest of the economy of the nation.
8. Clarity : The success of a tax administration depends upon how best the administration works, how clear are the guidelines, rulings are. Therefore, the Central Govt. should take every step to implement the tax statutes without any favour to any section or community. More clarity, more compliance.
9. Compliance : The compliance cost should be minimum as far as possible. The small and medium traders should be protected, safeguarded from very complicated compliances. However, the same should not be at the cost loss of revenue or favour to any section or community. The whole sale dealers has to pay the taxes of retailers also after the whole sale margin before delivering stocks to the retail trader. However, the Retail dealers has to file the details to claim the credit for the tax paid by the whole sale dealers on their behalf. Which leads to more compliance and more collection.
10. Encouragement : The tax administration should function in such a manner that the tax payers should feel encouraged to pay the taxes promptly without any confusion. Also, the dishonest tax payers should be punished immediately so to give impression that honest tax payers only will be protected.
11. Consumer Protection : The tax portion of any consumer price should not be more than 5%. This leads to encouragement to consumer also to pay honestly and feel happy. All sections should be covered. No undue preotection or favour should be preferred.
The above are some of my opinions which may be considered by the party for the purpose of successful implementation of GST Regime in the country.
