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Are we giving way to license-permit raj in GST too?

GST E-permit

Proposed Goods and Services Tax (GST)  benefits seem to have been  significantly diluted  as the draft law introduced clauses which allowed checking at inter-state borders and imposed the need for an e-permit to be flashed at inter-state borders as the states insisted the old analogue practices continue.

Although Centre was against it the states seem to have gotten their way and will continue with the old ‘permit raj’ system, undermining one the biggest gains of GST. Though the paper permit may become an e-permit, those transporting goods within or outside states will still have to queue up at border checkposts where their e-permits will be checked.

The centre resisted the move as its indirect tax administration moved away from the inspector raj era, but yielded to states’ insistence on inclusion of this clause in the final GST law in order to build consensus and get the reform bill rolling. State tax authorities wanted this provision to keep a tab on quantum of supply of goods and pushed for its inclusion. Experts fear this would not help in cutting long queues of trucks at check posts as also breed corruption.

“The central or a state government may require the person in charge of a conveyance carrying any consignment of goods of value exceeding .`50,000 to carry with him such documents as may be prescribed in this behalf…,” says the draft model GST law.

“Where any vehicle referred to in sub-section (1) is intercepted by the proper officer at any place, he may require the person in charge of the said vehicle to produce such documents for verification and the said person shall be liable to produce the documents.”

The guiding principle -One-nation, One-tax itself seems to be defeated with such a move. It seems that States are holding to ransom, Mr. Jaitley’s desire for ‘consensus’.  A crucial clause should not have been introduced at the whims of the state but should have been put to vote atleast.  (Centre has one-third voting power (33.33 per cent) and the states together will have two-third voting rights (66.67 per cent), according to the constitutional amendment Bill on goods and services tax (GST) )

Twitter was filled with criticism of the move.

Reactions to e-permit clause in GSTTwitter reactions to e-permit clause in GST

 

Twitter reactions to e-permit clause in GSTTwitter reactions to e-permit clause in GST

 

The GST Council, the apex decision body for GST that has state finance ministers as members and union finance minister as chairman, will take up the GST Law at its next meeting in March.

States have such a provision in their VAT laws where various forms are prescribed. This condition had dissuaded e-commerce players and they restricted delivery of goods exceeding.`5000 to a number of states.

Experts say any document checking at state borders does not go with the spirit of GST.

“The law provides for ample monitoring through the credit matching and compliance requirements under GST…. Any document checking at state borders is archaic and defeats the purpose of GST and the free market it purports to be,” said Bipin Sapra, partner, EY

“An e-permit system, if considered under GST, would significantly dilute the fundamental principles of GST relating to seamless movement of goods across states. It would adversely affect businesses who are preparing for GST on the understanding that trade barriers erected by states under the present VAT laws would be demolished under GST,” said M.S. Mani, Senior Director, Deloitte Haskins & Sells LLP

The centre was against the provision as it goes against the spirit of ease of doing business and encourages inspector raj.

“One of the stated promises of GST was to reduce associated documentation and related hassles. E-permits for movement of goods is therefore a retrograde step in the short term,” said Smita Roy, partner – Indirect Tax, BDO India, adding that it should be removed.

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