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Punjab Chief Minister Capt Amarinder Singh has written to the Prime Minister Narendra Modi seeking a review of the GST tax rates from the point of simplification. At the same time, Capt Amarinder urged him to ensure that GST is set right to mitigate, if not fully remove, difficulties being faced by trade, business and industry in the country.

Chief Minister, in his DO letter, has urged the Prime Minister for quick redressal of some key irritants in the GST in the spirit of cooperative federalism.

Capt Amarinder pointed out that GST was a reform in which the country as whole and political parties, irrespective of their affiliations and beliefs, had come together for national good.

"Among the key expectations from GST were simplification of the tax laws and processes, GDP rise, moderation in prices and boost to the tax revenues.  Somehow, the experience of the last one year has been more bitter than sweet," said Capt Amarinder stressing the need to try and work towards a perfect GST to celebrate this major reform in a true sense.

Noting that the experience of last one year showed many drafting and structural deficiencies in GST laws, the Chief Minister said that innumerable deviations made from standard provisions elsewhere had introduced tax distortions.

Successive reports by the committees constituted by the GST Council had recommended many important changes, he said, adding that as per his understanding, the Law Review Committee, comprising both the Central and State Government officials, had proposed nearly 200 changes. "There are significant changes necessitated in key provisions that form the heart and soul of the GST," he said, underlining the need to take them up for immediate wider stakeholder consultations and then processed for early legislative approval.

Likewise, multiple tax rates have invited wide criticism even if these have been justified in some circles on grounds of vast income disparity in India, said the Chief Minister, recalling that the Prime Minister had himself been quoted that Milk and Mercedes cannot have the same tax rate.

Many global experts feel that single rate has far greater advantages and the poor should be compensated through direct benefit transfers so that the rich are not benefitted from these concessions, he added.

He said that there was a strong rationale to review all tax rates from the point of view of major simplification which shall also curb evasion and leakages.

He said that the basic principle should be that goods of overlapping nature, close substitutes or goods capable of misclassification should not be subjected to differential rates. 

Expressing concern that GST revenues had not shown the kind of buoyancy that was expected, Capt Amarinder said that this was worrisome not only on the account of the impact it would have on the precarious financial position of the Governments but also the restraint it would place on the government expenditure and consequentially social justice and development.

Capt Amarinder pointed out that the revenue for the month of June, 2018 i.e. nearly one year after the GST came into force remains nearly the same as in the first month (Rs 95,160 cr vs 93,590 cr). Adjusted for nominal increase in GDP (at current prices) of even 10 percent the effective revenue was actually much lower over the last year, he noted.

The Chief Minster further said that he understood even this revenue was gross without reducing refunds. Net of refunds, the revenues reflect a far more grim picture.

Nearly 80 percent of the registrants were eligible for simplified composition scheme while less than 20 percent are actually availing its benefits, which shows that these dealers remain shy or even fearful of the GST law.

Apart from these concerns, Capt Amarinder also informed the Prime Minister that full potential of GST would only be realized when the energy sector, comprising petroleum and electricity, were included in GST.

"Power constitutes 20-30 percent of the cost in many key industrial sectors, today coal-based captive power plants of large industries enjoy GST benefits, while the same benefit is denied to standalone power plants and also captive power plants operating with natural gas," he said.

He pointed that in the course of repairing some of the GST shortcomings, concessions and exemptions have been issued on varying dates. "Most of them do not have retrospective effect while matters relating to tax rates or exemptions can be prospective, many others which were largely structural flaws needed to be reinforced from the starting date," he added.

Last but not the least, the Chief Minster revealed that there were many issues on the IT front which he felt should be addressed soon with a sense of urgency that has emerged after the initial glitches.

“We should ensure that the proposed new return should be an example of simplification for rest of the world rather than a puzzle like before,” asserted Captain Amarinder Singh.

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