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Corporate India will have to in the coming days brace up for tax exemption withdrawals not only on the direct taxes front, but also on indirect taxes.
The proposed Goods and Services Tax (GST) regime will see pruning of exemptions provided by the central government so as to ensure that cascading of taxes is minimised, Rashmi Verma, Special Secretary, Finance Ministry said.
The Finance Ministry is now for the GST regime looking to prune the Central list of exemptions and bring it to the level of States, she said at an international indirect tax and GST conference, organised by the PHD Chamber of Commerce and Industry (PHDCCI) here on Thursday.
The objective of this exercise is to have minimum level of exemptions so that cascading effect is minimised and seamless transfer of input tax credit as desired by industry, she said.
“To maintain the purity of GST, we will not be favouring many exemptions”, Rashmi said.
Currently, the number of exemptions at the Central stood at 292 (excise duty exemption) while at the State level it stood at 90 (VAT related exemptions).
“If the objective to minimise the cascading of taxes under GST, then we have to prune the current exemption list and do away with regime of exemptions to the maximum extent possible”, she added.
She also said that the Finance Ministry was not in favour of continuing with exemptions even for special category States.
However, if some particular States want to give special benefit to industry, then the Finance Ministry may not be averse to it.
The senior Finance Ministry official expressed confidence that GST would soon be a reality in India.
Meanwhile, the Central Board of Excise and Customs (CBEC) Chairman Najib Shah said in his address at the event that exemptions would be a “death knell: for GST”.
“The new GST framework predicates on the fact that you are not keep on asking for exemptions. Every exemption creates an arbitrage for misuse. Exemptions cause distortion. Exemptions does not help in seamless flow of input tax credit”, Shah said.
He urged industry to work with the point firmly in mind that exemptions should be kept to minimal level.
“Only then can we have a GST that would address the requirements of a good law”, Shah added.
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