Uttarakhand Commercial Tax Service Association today opposed the GST council's decision to keep the states out of the tax administration process under IGST, saying it went against the principle of fiscal federalism by narrowing down the role of states and their dealer base.
Criticising GST Council's handing over the complete administration of 'services' to the Central Board of Excise and Customs (CBEC) at its very first meeting on September 24, the Association's president Yashpal Singh said it was unfair on part of the council to take away the tax administration domain from state agencies citing their "lack of experience".
"Not only that but the Council also negated the right of state's absolute control of administration of such dealers which had an annual turnover of up to one and half crores, which was the result of prolonged debates," he said.
According to the proposed changes after GST, the Centre would levy and collect the Integrated Goods and Services Tax (IGST) on all inter-State supplies of goods and services in case of inter-State transactions.
On CBEC's charge that the states are against GST roll out, and their struggle for "more work" and opposition makes their intentions dubious in nature, Singh saidthe allegation was totally baseless and false.
"In reality the states are completely in favour of GST and the enthusiasm shown by them in ratifying the constitutional amendment proves the falsity of this bogus charge," he said.
States are opposed only to the idea of being kept out of the administration of"services"and there are primarily two reasons for this, he said.
"First the argument cited by GST council that state tax authorities are 'inexperienced' to divest them of administration of services is demeaning to them. And secondly, the Model GST Law has included many transactions under the definition of 'services' like work contract, transfer of the right to use, and transactions done by hotels and restaurants etc, which were hitherto covered under the category of 'goods'," Singh said.
In consequence, approximately about one third of the current tax base of states will shift from the control of states, which would be detrimental to the future prospect of state's service cadres, the Association president said.
As far as the question of struggling for 'greater work' is considered, then at present CBEC administers only around 11 lakh dealers and all the states together administer around 63 lakh dealers registered for indirect taxation, Singh said.
All such formulae that are proposed by the GST Council and even by states for administering this tax base, suggest that there would be fall in the dealer base that is hitherto being administered by the states, he said.
"It could be part of a long term strategy of permanently disfranchising states from the administration of indirect tax administration after bidding adieu to the principle of fiscal federalism," he said.
Expressing apprehension that moves like this will reduce
the GST to being an instrument of centralisation of tax administration and the country will move toward a "fiscal unitary" regime, he said subversion of a constitutional body like GST Council is not a good omen for the future of GST.
He also criticised the central authorities for "conveniently ignoring" the fact that the states are administering the tax on Central Sales since 1956 and Central Tax Authority is completely inexperienced for handling such transactions.
"So in fact on any rational analysis, the allegation of appropriating 'more work' is going to boomerang at CBEC. The tendencies to centralise the tax administration of GST are but natural. It is the very essence and nature of GST that it can only be best administered through an integrated tax administration authority," he said.
He argued that international experience attests that the success ratio of GST is more in centrally-governed countries. Probably this is the reason that the symbol of federally governed countries like USA has not adopted GST yet, he said.
