On the eve of GST Council meeting, the Confederation of All India Traders (CAIT) in a communication sent to Union finance minister Arun Jaitley has suggested to levy three stages GST instead of current multi-stage GST. The taxes subsumed in the value of the goods will encourage consumers to obtain bills, which will augment the revenue, the letter said.
The CAIT said the efforts of the government to simplify and rationalize the tax structure is appreciable but at the same time, the dip in the revenue collection is a matter of concern. Therefore, a mechanism is needed for easy collection of tax by the traders, which would help in additional revenue generation.
CAIT national president B C Bhartia and secretary general Praveen Khandelwal in the communication said that the general tendency among consumers is not to pay tax due to higher rates and thereby avoiding taking bills while purchasing goods. This has forced a sizeable number of transactions across the country to remain unaccounted, causing loss of both direct and indirect tax revenue to the government and for this the trading community is blamed for evading taxes which is not true.
Consumers not asking for the bill due to tax component is the major reason for shortfall in the revenue, they said.
In this context, both Bhartia and Khandelwal suggested levy of GST only at three stages in the entire supply chain. First, levy of SGST and CGST on first sale of a commodity in a State. Secondly, IGST on inter-state transactions and thirdly SGST & CGST on goods produced or manufactured in a State at the annual turnover of more than Rs. 50 lakhs.
After the first transaction in a State, the rest of the supply chain should be relieved from the levy of GST and the GST component should be merged in the price of the commodity so that when it reaches to the end consumer, the commodity becomes already tax paid. It is noteworthy to mention that subsequent transactions after first sale in a State add minimal value addition and as loss of revenue arising out of it could only be upto 2 percent. But since the GST is levied on the first point, it will accrue additional revenue from 10 percent to 15 percent. Since the goods will be purchased in a State only after paying GST, therefore, the possibilities of tax evasion will not arise at all.
He further said the consumers well aware of the fact that the goods are already tax paid and they need not to pay money for taxes, will obviously demand the bill while purchasing goods and will not be certain they will not be avoiding taking bills. In this case, the informal sale will be converted into formal sale, which is bound to increase the revenue whereas more and more transactions will come under formal economy.
Such a step, on the one hand, will minimize the tax assesses where only a few lakhs of entities will be required to be registered under GST instead of crores of entities thereby will be easy for the government to monitor and regulate tax system in a better manner and GST portal will be offloaded to a great extent.
As far as revenue sharing between the states is concerned and if at all need arises, the Finance Commission can draw a formula under which accrued revenue is shared between the states.
In any case both the governments at origin place and consuming place will get their due revenue and the Central government will get revenue from both places. It will also relieve a large number of traders from the clutches of tax system. When consumers will insist for bills, a considerable number of transactions will come under formal system and direct tax collection of the government is bound to grow leaps and bounds-said Bhartia and Khandelwal.
They also suggested that traders should be given status of tax collectors and certain rewards and schemes should be announced for them for collection of highest taxes. On the other hand some benefits in tax collection in form of tax rebate should also be given to tax collectors in order to encourage collection of more and more revenue.