Kerala Finance Minister Thomas Isaac has said that tax officials and politicians must develop clarity of mind with regard to Goods and Services Tax (GST) before engaging assessees and stakeholders.
Officials must lend a patient ear and hold sustained interactions with assessees to remove their apprehensions, he said while inaugurating a session here on ‘Training trainers on GST.’
Resistance likelyThe GST will come up for resistance from consumers and traders since both are likely to be unaware of benefits accruing from migration from value-added tax (VAT) system.
“It’s natural that they might find unacceptable the rise in levy from 14.5 per cent, which they are familiar with, to 20- or 22 per cent under GST. They will need a lot of convincing,” he said. The argument that the GST is inflationary does not hold much water. This is because incidence of tax will only come down from a high of up to 35 per cent under VAT to a band of 20 to 22 per cent.
“If anything is inflationary, it has to be the additional excise duty on petroleum products. Let the Centre bring this down first if it wants to rein in inflation.” The important challenge with the GST will be whether it would lead to any reduction in maximum retail price. Consumers may not benefit if the experience with the VAT regime repeats itself here.
Flexibility issueAnother issue is whether there is a need to allow some degree of flexibility with the GST rate. According to Isaac, it is an accepted norm to have a band for state GST.
A third issue would be on how State officers interact with counterparts from the Centre as also those from the Income-Tax Department to ensure efficiency in collection.
As for technology preparedness, Kerala is fortunate to have a headstart. It is overhauling the system. Servers are being upgraded and changes are made in the software, Isaac said.