April 19, 2019



By Somesh Arora, Advocate, CCO Amicus Rarus and Former Commissioner of Customs and Central Excise

The current year i.e. 2016 marks a decade of preparation of what was dubbed as the biggest tax reform announced in 2006 by the then U. P. A. Government. The Tax reform has become a captive to the number game in the centre and power grabbing attitude of the states. The destiny of this tax reform has been changing according to the ruling equations in Centre and State and the same is even now being used to extract some quid-pro-quo at the Centre level by a political party.

The criticism now being leveled against the existing GST Draft Bill mainly includes that States should not have any power to levy any other taxes like ‘Entry Tax’, this in any case is not provided for in the Draft State Model GST Bill, 2016 and therefore should not be a matter of concern as the same is being subsumed even as per the concept paper. The point was being raised by States like Maharashtra who normally have different Governments in the State and Municipal levels and concern of the Municipal authorities was that they may not get their proper share of revenue in case the same has to be channelized through State Governments. But these concerns were duly addressed by assurance form the states during deliberations.

Though, it is the fact that Congress had desired that there should be a cap of 18% through a Constitutional Provision, yet as the Finance Minister has pointed out no cap on the lower or higher cap has been provided for in the Draft State Model GST Bill, 2016 and the same has been done, according to an emerged consensus. This is so, because a guarantee has been given to the States by the Centre that there will be no loss of Revenue for them. Since, GST will be in formative stages of implementation and shall evolve later on, therefore, no government can risk itself committing to a particular rate only. As in that case, alternate revenue channels and levies will have to be looked for in short term, which will defeat the purpose of sub-assuming the purpose of other levies into GST and will make the reform counter productive.

Another criticism of the GST is on account of making various offences non-bailable. It is a fact that tax authorities normally tend to use arrest provision for taking coercive measures during investigation. As has become known during the time when Apex Court declared that Customs and Excise offences are bailable, there was considerable reduction in voluntary deposits and arrest. It is however, a matter of perception that ever since these offences have been made non-bailable, the arrest for the same offences as well as so called voluntary deposits have gone up, this clearly shows that voluntary deposits are not voluntary but are coercive in nature to deny the assessees their right to litigate. Though GST Bill has sufficient settlement provisions, but still to make the reform worthy, it is necessary that same should also be carried out and there should be prescribed a requirement that all statements during Investigation can be recorded either before a camera or within the visible limits of an Advocate. This will ensure that voluntary statements are really voluntary and fears of assessees, and their fundamental rights are duly taken care of.

Further, though there has been recently a pronouncement by the Bombay H.C. in the matter of cleartrip on the service tax side in Petition no. 1088/2016 dated 26.4.2016 that there cannot be arrest during pendency of investigation an, though H’ble Delhi H.C. is also seized of similar issue in Makemytrip case, still for non–cooperating during investigations whether such arrest can be done or not is still not clear from doubt and even the order of Bombay H.C. has still not become a final word till apex court decides the issue., which was again in relation to Finance Act,1994.

Credit: google.com for pic.