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Chief Minister Dr. Shurhozelie Liezietsu speaking at the workshop on GST at the State Banquet Hall, Kohima, on May 26. (EM Images)[/caption]
Kohima, May 26 (EMN): With the country set to implement the Goods and Services Tax (GST) regime from July 1 next, the Nagaland Legislative Assembly (NLA) will be introducing the Nagaland GST Bill 2017 for consideration and passing during the special assembly session scheduled to be held on Saturday.
This was announced by the chief minister Dr. Shürhozelie Liezietsu today while addressing a workshop on GST organised by the State’s Finance Department and Commissionerate of Taxes at the State Banquet Hall, Kohima, to familiarise law makers on the issues connected with the new taxation regime. The State cabinet is said to have approved the State GST Bill on May 26.
Stating that the introduction of GST will open a new era of indirect taxation structure and administration in India, Liezietsu expressed optimism that the new tax regime is also going to be a milestone for making the tax administration in Nagaland more effective and transparent and result in a beneficial effect on the consumers and the economy as a whole.
The imminent major reform in the taxation system of India has taken over a decade to be formulated and has been done through amendments of the Constitution. The enabling amendment titled the Constitution (122nd Amendment) Bill 2014 was passed by both the Houses of Parliament in August 2016 and later on, it was ratified by the states including the NLA on August 26, 2016. It was then notified as the Constitution (101st Amendment) Act 2016 in September last.
Following this in April this year, the central Acts on GST were passed by the Parliament and the Presidential assent was also obtained. The final step for implementation by the states is the passing and enactment of the respective state GST Bill by each of the state assemblies.
Chief minister Liezietsu said there is a multitude of indirect taxes that have been levied by both the centre and the states, creating a lot of complexities ever since India gained independence. A deeper analysis reveals the existence of inefficiency in the taxation system to a large degree, he stated.
“Our tax structure also leads to tax on tax, thereby making our businesses expensive and uncompetitive,” the chief minister said while pointing out that any product or item which is sold in the market and on which tax is imposed, passes through different types of indirect taxes at various points.
Elucidating this, he cited that a clothing item bought by a consumer in Nagaland initially gets taxed at the factory level by way of central excise by the Union government, then by way of CST when it goes from the manufacturer to wholesaler and from wholesaler to retailer, and finally when the consumer buys from the retailer it is taxed by the state under state sales tax or Value Added Tax (VAT).
In the present tax regime, he pointed out that if all the sale points were within the state, there will be some relief in the form of VAT wherein one is allowed to take credit for the tax already paid in the previous transaction. He, however, maintained that the tax structure does not provide any relief in the form of tax credit if the goods are manufactured somewhere else and reaches Nagaland after passing through many intermediate taxpaying sellers located in some other state(s).
“Realising the significant inadequacies of the present indirect taxation regime in the country, a simpler and unified system of taxation was initiated about one and a half decade ago at various forums, particularly at the central government level,” Liezietsu stated. He said this was to make the whole indirect taxation process more transparent and more effective and easier to implement.
The chief minister also highlighted that the GST is going to create a system, where one will be allowed to claim credit for the tax paid earlier, irrespective of the kind of indirect tax and also the place where it has been paid. Such a scenario, he maintained, will lead to avoidance of cascading of tax, thereby bringing down the cost of the product or service and will benefit the end consumer.
“This system will also check tax evasion since the trade and industry will benefit by coming under the GST system through a ‘self policing’ mechanism. In the process, the tax base is likely to expand and lead to more revenue collection,” he added. Further, he stated that due to the ‘destination principle,’ where taxation is on supply and consumption and not on manufacturing, a state like Nagaland which is pre-dominantly a consumer state will benefit.
While admitting that a rise in the tax collection in the State is expected under the new regime, he said in the event of loss of revenue, the State would be compensated for the shortfall in collection by the central government for the next 5 years, for which, the relevant Act has already been passed by the Parliament.
State Commissioner of Taxes, Asangba Chuba Ao, delivered a presentation on GST and explained the features of the new tax regime. Making a comparison between the current tax system and the GST, he highlighted that there is a lack of uniformity in different states, cascading effect of tax, dilemma between goods and services whereas, under the GST there will be one uniform tax for manufacturing, trading and services in different states.
The benefits of GST, the official explained, include decrease in inflation- reduce cascading of taxes and there will be overall reduction in prices; ease of doing business- common national market and benefits to small taxpayers; decrease in ‘black’ transactions- self regulating and non-intrusive electronic tax system; a more informed consumer- simplified tax regime and reduction of taxes; poorer states will gain- as it would become consumption based tax and CST will be abolished; and would promote ‘Make in India’ as exports would be ‘zero rated’ and protection of domestic industry (IGST) will be applied.
Answering a query raised by a legislator on whether Nagaland could be exempted from GST as taxation in the State goes beyond taxation by the government, the Commissioner replied that manufacturers will not sell their goods to any state that choose to remain outside GST.
