Set­back for GST: Per­mit Raj Ends, Long Live E-Per­mits

On states’ in­sis­tence, those trans­port­ing goods within or out­side states will have to queue up at bor­der for check­ing of e-per­mits

The Economic Times - - Economy: Macro, Micro & More - Deepshikha.Sikar­war @times­

New Delhi: The rev­o­lu­tion the pro­posed goods and ser­vices tax (GST) promised might not be all that rosy be­cause it would be hob­bled by the need for an e-per­mit to be flashed at inter-state borders as the states in­sisted the old ana­logue prac­tises con­tinue.

The states seem to have got­ten their way and will con­tinue with the old ‘per­mit raj’ sys­tem, un­der­min­ing one the big­gest gains of GST. Though the pa­per per­mit may be­come an e-per­mit, those trans­port­ing goods within or out­side states will still have to queue up at bor­der check­posts where their e-per­mits will be checked.

The cen­tre re­sisted the move as its in­di­rect tax ad­min­is­tra­tion moved away from the in­spec­tor raj era, but yielded to states' in­sis­tence on in­clu­sion of this clause in the fi­nal GST law in or­der to build con­sen­sus and get the re­form bill rolling.

State tax au­thor­i­ties wanted this pro­vi­sion to keep a tab on quan­tum of sup­ply of goods and pushed for its in­clu­sion. Ex­perts fear this would not help in cut­ting long queues of trucks at check posts as also breed cor­rup­tion.


The GST Coun­cil, the apex de­ci­sion body for GST that has state fi­nance min­is­ters as mem­bers and union fi­nance min­is­ter as chair­man, will take up the GST Law at its next meet­ing in March.

“The cen­tral or a state gov­ern­ment may re­quire the per­son in charge of a con­veyance car­ry­ing any con­sign­ment of goods of value ex­ceed­ing .₹ 50,000 to carry with him such doc­u­ments as may be pre­scribed in this be­half…,” says the draft model GST law.

“Where any ve­hi­cle re­ferred to in sub-sec­tion (1) is in­ter­cepted by the proper of­fi­cer at any place, he may re­quire the per­son in charge of the said ve­hi­cle to pro­duce such doc­u­ments for ver­i­fi­ca­tion and the said per­son shall be li­able to pro­duce the doc­u­ments.”

States have such a pro­vi­sion in their value added tax laws where var­i­ous forms are pre­scribed. This con­di­tion had dis­suaded ecom­merce play­ers and they re­stricted de­liv­ery of goods ex­ceed­ing .₹ 5000 to a num­ber of states. Ex­perts say any doc­u­ment check­ing at state borders does not go with the spirit of GST.

“The law pro­vides for am­ple mon­i­tor­ing through the credit match­ing and com­pli­ance re­quire­ments un­der GST…. Any doc­u­ment check­ing at state borders is ar­chaic and de­feats the pur­pose of GST and the free mar­ket it pur­ports to be,” said Bipin Sapra, part­ner, EY

“An e-per­mit sys­tem, if con­sid­ered un­der GST, would sig­nif­i­cantly di­lute the fun­da­men­tal prin­ci­ples of GST re­lat­ing to seam­less move­ment of goods across states. It would ad­versely af­fect busi­nesses who are pre­par­ing for GST on the un­der­stand­ing that trade bar­ri­ers erected by states un­der the present VAT laws would be de­mol­ished un­der GST,” said M.S. Mani, Se­nior Di­rec­tor, Deloitte Hask­ins & Sells LLP.

The cen­tre was against the pro­vi­sion as it goes against the spirit of ease of do­ing busi­ness and en­cour­ages in­spec­tor raj.

“One of the stated prom­ises of GST was to re­duce as­so­ci­ated doc­u­men­ta­tion and re­lated has­sles. E-per­mits for move­ment of goods is there­fore a ret­ro­grade step in the short term,” said Smita Roy, part­ner – In­di­rect Tax, BDO In­dia, adding that it should be re­moved.


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