Finance ministry asked to adopt negative list under GST

July 24th, 2011 - 3:03 pm ICT by IANS  

New Delhi, July 23 (IANS) A leading industry lobby has urged the finance ministry to introduce a negative list under the proposed Goods and Services Tax (GST)

The Federation of Indian Chamber of Commerce and Industry (FICCI) said the introduction of a negative list would help bring clarity on what goods and services could be taxed, reduce exemptions and thereby widen the tax base and reduce disputes.

The “negative list” would mean that barring the services and goods listed, everything else could be taxed, making the exempted goods and services cheaper.

“A well articulated negative list will clearly bring out the intentions of the policy makers as to what precisely is outside the tax net,” said FICCI in a note to the Finance Ministry.

The body also said that the negative list method was apt in the proposed dual GST framework under which the state governments would also collect the tax on services.

“In a positive list approach, the probability of different state GST administrations interpreting differently the various definitions of services would be higher compared to negative list approach. This would lead to chaos and uncertainty in services taxation,” said FICCI.

The proposed GST could be successful only if it had a combination of comprehensive goods tax and a comprehensive service tax with negative list for both.

FICCI also said that the government could also look at other options to do away with exemptions.

“Direct and transparent subsidies could be one of such options. They are more efficient in achieving targeted objectives. Besides, there is also a need for specific provisions that limit flexibility of states within a set of prescribed criteria to prevent misuse as far as accommodating goods / services of local importance,” FICCI said in the letter.

“Such limited flexibility would also need to be extended to the Centre to address exceptional situations such as natural disasters.”

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