Authorities must not encourage food bigotry or harass legitimate businesses

Last week Gujarat adopted a draconian law against cow slaughter, making it punishable with a 14-year jail term. This is on the heels of a clampdown on abattoirs in UP. Over in the Jharkhand capital, licenses of mutton and chicken shops haven’t been renewed. Voices are growing from Hindutva organisations in Rajasthan, Chhattisgarh, Uttarakhand, Madhya Pradesh and other BJP-ruled states for a blanket closure of meat shops. Taken together there are worrying signs of a rise in food bigotry, cow vigilantism, harassment of legitimate meat businesses and competitive fundamentalism.

It’s important to note that cow slaughter was banned in all these states even before the current NDA government took office. Gujarat for example had imposed a complete ban not just on slaughtering but also on transporting cow and progeny in 2011. Today if it were simply a matter of improving the implementation of all laws, incidentally including such bans, it wouldn’t necessarily be such an adverse development. A clampdown on illegal slaughterhouses would be welcome if it meant a more modern, compassionate and hygienic meat industry.

Unfortunately this is not the message that goes out when Gujarat chief minister Vijay Rupani says he wants to make Gujarat vegetarian, his government decrees veritable life sentences and Chhattisgarh chief minister Raman Singh talks of hanging those who kill cows. Or when legitimate UP enterprises that account for over half of India’s $5 billion worth of buffalo meat exports are threatened. It’s not just precious foreign exchange but lakhs of jobs that are at stake in an economy characterised by jobless growth. Even if one wants to institute bans on cow slaughter, this cannot be equated to the taking of a human life. Such conflations amount to religious fundamentalism which will breed conflict and violence – Pakistan next door is a good example of how it plays out. The vigilantism and violence seen from Dadri to Una could now get worse, endangering social stability and harmony.

Some months ago Prime Minister Narendra Modi had come down heavily on such vigilantes, calling out the majority of ‘gau rakshaks’ as anti-socials who proclaim themselves cow protectors only to cover up their misdeeds. Yet, in conflicting signals, legitimate meat businesses are suffering and non-vegetarianism is facing an aggressive Hindutva attack. Both Centre and BJP-ruled states need to send a more coherent message, about respecting individual liberties and protecting legal businesses.


We don’t expect to use anti-profiteering clause much, says Hasmukh Adhia

Revenue Secretary Hasmukh Adhia. (File Photo) Revenue Secretary Hasmukh Adhia. (File Photo)

The anti-profiteering clause in the GST Bills are meant to apply only during a short transitional period, revenue secretary Hasmukh Adhia said, adding that the government hoped it won’t have to use the “enabling provision” much.

Speaking to a TV channel on Thursday, he said most services would likely fall under 18 per cent GST rate, while a few on which the effective tax rate is lower than the marginal rate (including cesses) of 15 per cent due to abatements, might come under lower rates of 12 per cent and 5 per cent. Instances of rate shocks from GST would be few, he said, as the fitment process would be a “mechanical” one, with the principle that items should come under the GST rates nearer to current tax incidence on them.

Adhia said bringing real estate under the GST involved many questions like those related to land, including farm land, coming under it and carving out separate regimes for businesses where real estate could be an input and self-occupied property.

Since instances of rate tax shocks due to GST would be few – most commodities and services would move to the nearest GST slab-, there would be little scope for businesses to profiteer by not passing on the reduced liability from GST, he said. While he admitted that the possibility of businesses increasing the price of commodities now, in anticipation of the July 1 roll-out of GST was a cause for worry, he said that most items (90-95%) were in the competitive market domain which doesn’t allow sudden hikes. But for the items that are produced by monopolies, prices rise was a possibility, he said.

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With India Inc unclear about certain key aspects of GST, postponing it makes more sense

By Pratik Jain

The goods and services tax (GST) has received unprecedented support from all quarters. Government believes it will lead to revenue buoyancy, industry expects a simpler and more competitive tax regime, and the common man expects reduction in prices, once GST is implemented. The speed at which GoI has moved over the last six months or so is also very impressive. The GST Council met 12 times and resolved all the issues amicably, without the need for a vote. The rate structure was agreed upon, complex legislative and administrative issues were thrashed out and consensus was reached on the timelines for the rollout.

With the Cabinet approving the four central GST laws on March 20, and the Lok Sabha passing the Bill on Wednesday, this indeed is, in finance minister Arun Jaitley’s words, a ‘revolutionary’ Bill.

With this, while the government looks all set to implement GST by July 1, industry is getting nervous as to whether it will be ready in time. While the model law is available, few fundamental aspects, such as the states where tax has to be paid by service providers having multiple offices, treatment of current excise incentives, offset of tax already paid on transition stock, etc, are still unclear.

On March 24, GoI announced setting up of working groups for certain sectors including banking, telecom, exports, IT/ITeS, transport and logistics, and textiles. The working groups have been tasked to meet the industry associations, professionals and concerned administrative ministries to look at key issues and provide suggestions. This list of working groups may be expanded further to include few other sectors such as real estate and FMCG.

The working groups have to submit their report by April 10, which looks too short a time for a meaningful interaction and detailed analysis of complex sector-specific issues. It is also possible that a few of these issues might later require a legislative change, though the focus would be on procedural issues and rate of tax.

Don’t Tax Breathing Space

While the GST Act is in place, the rules are yet to be finalised. These include very critical aspects relating to valuation (including related party transactions and inter-state stock transfers), input credits including the credits pertaining to transition stock, and manner of inter-office invoices. Once the GST Council has a discussion on these rules in its next meeting on March 31, one can expect at least one month before they are finalised. So, final rules can only be expected by end-April.

Only after this can the enterprise resource planning (ERP) and software companies come out with their final GST patch/solution that needs to be deployed, customised (depending on the needs of a particular business) and tested thereafter. It is extremely difficult, if not impossible, to do this in two months.

Recently, the Confederation of All India Traders (CAIT) made a case for delaying the rollout of GST to September 1. They argued that about 70% small businesses are yet to adopt digital technology in their business and it is a big challenge for them to computerise themselves in this short period.

While GoI intends to start a nationwide outreach programme for businesses from April onwards, given the magnitude of task in hand, it may not be possible to do this in a couple of months. If small businesses, which could constitute a majority of registered businesses under GST, are not ready, GST may cause unwarranted disruption.

Finalisation of rate of tax is another complex area that will take time. It seems that the exercise of ‘bucketing’ various goods in the slabs decided by the GST council (5%, 12%, 18% and 28%) would commence in April. It will not be an easy task, especially for products on which the rates vary in different states, like edible items and agricultural commodities, IT products and mobile phones, and used cars.

Then there are products that are exempt from excise duty but attract state value-added tax (VAT), and vice versa. All this may need detailed deliberations in the GST Council. So, the rate of tax may not be finalised before end-May or even early June. It would give only one month or so for companies to decide the prices of products in a post-GST regime. This may also mean changing the maximum retail prices (MRPs) of the stock that is already in the distribution chain.

Profit Nuts Get GST Bolts

The proposed anti-profiteering clause — similar to proposals in Malaysia and Australia on transition to GST — has further put a spin on this. If enacted, this will require businesses to pass on the benefits arising from reduced rates or higher credits to the customers. Pricing, compliant with this provision, cannot be done unless the rates are finalised. Therefore, while we eagerly await GST, there are still a few nuts and bolts to be tightened, which will take a bit longer. While the finishing line is of utmost importance, we should not falter in the last leg of the race. Introducing GST from September 1makes more sense.

(The writer is partner, indirect tax, PwC)