CLEARING HOUSE - GST, a step closer to realization

BY SURABHI AGARWAL
NEW DELHI


The efforts to usher in a goods and services tax (GST) received a big boost with the states as well as the Centre agreeing to the set- ting up of a clearing house to resolve tax collections and credits under the National Se- curities Depository Ltd (NSDL), India's oldest deposi- tory, as a special purpose ve- hicle.

This entity will then be spun off as an independent compa- ny in which NSDL will retain 10% and the balance will be distributed between the Centre and the states. A meeting of the empowered committee of state finance ministers, sched- uled for 4 August, is to decide on the proportion of the equity share between the Centre and the states.

The in-principle approval to go ahead with a clearing house was accorded at the last meet- ing of the empowered commit- tee on 21 July.

The clearing house, a key part of the GST architecture, is expected to ease the creation of the common market, ensure that each state gets its share of revenue and also provide use- ful tax information to the au- thorities. The proposal envis- ages a standard electronic re- turn, which each of the esti- mated eight million establishments will be re- quired to file every month.

To facilitate the implementa- tion of the clearing house, the department of revenue, under the ministry of finance, has no- tified a group under the chair- manship of Nandan Nilekani, head of the Unique Identifica- tion Authority of India. Apart from Nilekani, the group for GST (IT infrastructure) includes Y.G. Parande, member, Central Board of Excise and Customs (CBEC); K. Jose Cyriac, addi- tional secretary, revenue; Satish Chandra, member-secretary, empowered committee; and F.M. Jaswal, director general (systems), CBEC. The commit- tee will also include two state government representatives.

“Institutions such as NSDL may offer combo have the experience of handling volume as the nature of such transactions would re- quire,“ said Guru Malladi, partner of audit and consulting firm Ernst and Young. NSDL also operates the tax informa- tion network on the direct tax- es side.

The GST clearing house will be similar to a stock exchange.
All the states will be members and the agency will make sure tax revenue is transferred to the right state after every transaction.

The backbone needs to meet three conditions to start opera- tions: businesses must be able to register online, taxes can be paid after self-assessment and returns can be filed online.

“The clearing house mecha- nism is very industry-friendly as it will eliminate the hassle for dealers to register in all the states,“ said Pratik Jain, execu- tive director at audit and con- sulting firm KPMG.

GST is an attempt to trans- form India's indirect tax sys- tem by dismantling fiscal bar- riers between states and creat- ing a common market. It is ex- pected to lower operating costs for businesses and lower pric- es for consumers.

The states, through the em- powered committee of state fi- nance ministers, in November proposed a clearing house model and dubbed it IGST (in- ter-state transactions of goods and services). The finance ministry accepted the IGST proposal in January.

In its report on 9 June, Mint had reported that the govern- ment could skip some time- consuming steps involved in using third parties to create the backbone for GST in order to fast-track the process as the 1 April deadline for implement- ing GST is fast approaching.

source:livemint