101 suggestions to 'simplify GST': Amarinder to Modi

Punjab Chief Minister Amarinder Singh Friday wrote to Prime Minister Narendra Modi, giving 101 suggestions on GST simplifications to alleviate the problems currently faced by businesses.

In his letter to the Prime Minister, Amarinder, while congratulating Modi on BJP's spectacular victory in the recently held Lok Sabha elections, welcomed the resolve expressed by him to move at a brisk pace to take the country on a trajectory of high growth and social justice.

Amarinder while citing the high expectations of the people in Punjab, said he looked forward to working with the prime minister to bring prosperity to the people of India as well as the state.

Specifically, the chief minister has made several suggestions on improving GST revenues that should help Punjab narrow its revenue deficit.

He has suggested that the State Goods and Service Tax (SGST) rate should be higher than Central Goods and Service Tax (CGST) so that all states do not suffer such huge deficits.

Amarinder has suggested an amnesty scheme to overcome the 'various aberrations that led to serious confusion in the business circles in the initial phase of GST', saying there was no need to continue with VAT legacy issues, which should find a sunset clause.

Pointing out that India has the dubious distinction of being amongst five countries in the world that have four or more non-zero GST rates, the chief minister called, ideally, for a single GST rate, but said it should include not more than two rates for any chapter and not more than one rate at four-digit level of any chapter sub-heading.

“This will ensure harmonisation of tax rate across similar supplies and avoid classification disputes besides opportunities to evade,” he added, as per an official statement, giving the example of different tax rates in various modes of transport.

Amarinder has also suggested widening the GST net to include electricity, real estate and petroleum to make it a 'win-win situation' for states as well as businesses.

Noting that electricity constitutes up to 30 per cent of the cost of production in many key sectors and its exclusion from GST results in huge cascading of up to 10 per cent, the chief minister has pointed out that the present structure prefers coal-based polluting captive power plants of big industries over stand-alone power plants (many using natural gas) from where MSMEs source their power.

“Naturally MSMEs are facing the pinch after GST. Exclusion of products like crude and natural gas from GST results in a situation where it is beneficial to export them and re-import rather than supply them directly within India.

Many states like Punjab lose a big chunk of revenue as the embedded taxes on these products are retained at source rather than at the place of consumption,” he pointed out.

The expected growth of up to 1.5 per cent in GDP after GST has largely remained a pipe dream mainly because Indian businesses continue to suffer from considerable cascading.

Tax credits are the real soul of a value-added tax and its blockage acts like “bad cholesterol in human body”, he mentioned.

Amarinder has made many suggestions to remove embedded taxes in order to make Indian businesses competitive rather than benefitting imports over domestic production.

Besides addressing structural issues, penal matters, revenue enhancement as well as tax rates and exports and imports, the proposals include initiatives for simplification of the tax regime, issues relating to supply, input tax credits and valuation.

With increasing reliance on technology, Amarinder has given various suggestions that should help move towards easy automation of processes and even a driverless environment in GST compliances based on algorithms.

He has also strongly advocated wider trade consultations and constitution of a Council Secretariat on a permanent basis that could undertake informed studies on GST and help bring far greater certainty on key subjects.

Listing GST as a key challenge that should remain high on the new government's agenda, the chief minister said in its current form, the GST regime was choking the true potential of MSMEs by unnecessary restrictions on inter-state movement of goods, which he said should be liberated.