There may be multiple service tax rates, say revenue secretary

The goods and services tax (GST) regime, which will come into force from July 1, will have compliance rating of tax payers and unique identity (ID) for transporting goods over Rs 50,000. It may have more than a single tax rate for services, could soften prices of most products while maintaining the tax outgo on services, make exports from India more competitive and will completely do away with all paperwork, said Hashmukh Adhia, revenue secretary, while speaking to the media on Tuesday.       

As the date for rolling out GST draws nearer, the government's preparation for it has shifted to a higher gear even as it tries to educate tax payers to ensure smooth transition to the new milieu of the newly- proposed unified indirect tax.

Adhia said all tax payers would start with the same compliance rating but it would be changed based on their track record of filing the returns. The government official also clarified that those with annual income above the turnover and composite thresholds of Rs 20 lakh and Rs 50 lakh respectively, who have only B2C transactions and no B2B transactions, would have to reveal only turnover for filing returns.

"We need invoice-wise details of B2B for the input tax credit (ITC), which will be used for matching the invoices," he said. According to him, even if some invoices for ITC did not match, refund would be credited into the tax payer's account and he would be given a month for resolving the dispute, or else the ITC deposit will be reversed by the government.

The revenue secretary in the Finance Ministry also informed that there was a possibility of more than one service-tax rate; "It is a possibility that there will be more than one rate in service tax. For instance, services with abetment with valid reason, may have a lower tax rate of below 18%".

Adhia also talked about a unique ID for moving goods above the value of Rs 50,000 to be issued by the information technology (IT) infrastructure firm GST Network (GSTN), and would be required to be produced at various check posts.

"This unique ID for e-permit can be generated either by consigner, consignee or the transporter," he said.

The bureaucrat also shrugged off fears of inflationary impact of GST on goods and services.

He believes that with a host of existing taxes being subsumed into GST and wearing off of cascading effect prices of goods, are likely to fall post the implementation new indirect tax. Citing an example of goods that are currently in the 32% tax-rate slab, he said the tax rate on them would come down to 28%. Even for services, he feels the 18% GST rate would work out to be around 15% due to the ITC that can be availed by service providers on taxes paid on goods consumed for providing services.

"There might be marginal hike in certain cases, otherwise if you take service providers their purchase of goods is huge and will get ITC on that. So, 18% will become equivalent of 15% only," he said.

Adhia feels GST will make exporter of Indian goods more competitive as they will be able to get complete refund of all the taxes in a shorter time than before. Currently, states are giving refund on value added tax (VAT) but it takes a long time. Under GST, exporters will get 90% of the tax refund online in seven days after exporting their goods.

The new indirect tax regime will treat special economic zone (SEZ) as foreign territory with zero rating of exports and all the taxes will be refunded.

He said even though there was a provision in the GST Act for refunding taxes paid by foreign tourists, it would not be available now but would not be taken up later. He said the government was sticking to the July 1 deadline and prodded the trade and industry not to be complacent as it did not need much preparation.

Adhia was expecting all states to pass the State GST (SGST) law by May 31, which would then pave the way for the new proposed indirect levy to be launched.