Proposed GST structure does not stand on merit

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In the wake of Parliament nod to the GST Bills, economist Parthasarathi Shome on Friday said the proposed GST structure does not stand on merit when compared globally.

Shome, a former adviser to the Union Finance Minister, said leaving petroleum and electricity out of the GST base will lead to continuation of cascading of taxes.

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“Leaving petroleum and electricity out (of GST) will lead to severe cascading effect. There will be cascading downstream and upstream. To explain, businesses or industry using petroleum will not be given input tax credit since the petroleum tax will not be called GST,” he said.

Shome said since petroleum sector is not in the GST base, “the GST it pays on its own inputs will also not generate input tax credit for this sector”.

“This could thus be a double-edged sword for generating cascading,” he said here at an interactive session organised by MCC Chamber of Commerce and Industry.

According to him, several products are out of GST base and that implies a portion of our GDP will not generate input tax credit. “So significant cascading of taxes is likely to continue,” he said.

“So can we call the proposed structure a GST? We can call it GST if we wish but it does not stand on merit when we compare it globally,” said Shome, who is now Chairman of International Tax Research and Analysis Foundation, Bengaluru.

He said much longer consultation period with stakeholders should have taken place.

His latest book, Development and Taxation — 60 Critical Commentaries, was released here.

IANS, April 7 2017

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