Inter-State sale, an irksome issue under GST

The floundering World Trade Organisation's Dispute Settlement Mechanism works overtime to mediate in the disputes that inevitably crop up between member-nations, be they about goods or intellectual property rights.

One cannot help wondering whether a similar fate awaits the proposed Goods and Services Disputes Settlement Authority to be constituted under the GST dispensation that would kick in once the 115th Constitution Amendment Bill introduced in Parliament is duly passed, with requisite majority, both by the Centre and the States.

That the GST power is not going to be codified under the concurrent list of the Constitution is significant in this regard because, on a matter figuring under that list, Parliament has the last laugh should a State choose to strike a defiant note.

The Centre has chosen not to rock the boat by wisely giving simultaneous powers both to the Centre as well as the States and Union Territories to make laws on the same subject and same items of goods and services. While this is a good augury that testifies to the non-confrontational approach of the Centre and is in keeping with the nation's true federal character, the States can be counted upon to knock at the doors of the Disputes Settlement Authority from time to time, both for actual and perceived grievances, just as the Centre too can, though the latter's hands could be restrained at times, depending upon the ruling dispensation in the State concerned.

Unified structure

Be that as it may, the bottom-line is there is a healthy and welcome move towards a unified tax structure that ropes in all goods and services, except a few, such as petroleum products and alcohol for human consumption, on which the status quo continues. Newspapers too have been caught by the GST pincer. Hitherto, they have been immune from indirect taxation completely.

The troublesome problem of what an ‘inter-State sale' is would continue to haunt the tax administration and the judiciary even under the GST because in respect of inter-State sale, the status quo is sought to be maintained.

One wishes that a satisfactory solution is found to this vexatious problem within the four corners of power-sharing by the States and the Centre, with the three parties involved — the Centre, the originating State and the destination State — sharing the tax equitably which indeed is the spirit of the new law on the anvil.

To shut out the States and vest the Centre with the sole power to tax inter-State transactions is not only regressive but also dilutive of the whole exercise in that inter-State sales account for a sizeable share of business done in India.

(The author is a Delhi-based chartered accountant.)

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