' Goods and Services Tax to Boost Economy: ICAI President

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Goods and Services Tax to Boost Economy: ICAI President
By Florine Roche

Oct 8, 2011

Pics: Dayanand Kukkaje
Daijiworld Media Network

Exclusive Interview with G Ramaswamy, President of ICAI - Part II

President of the Institute of Chartered Accountants in India (ICAI) G Ramaswamy was in Mangalore to lay the foundation stone for the Mangalore branch of Institute of Chartered Accountants of India in the city recently. In the backdrop of two major bills - Goods and Services Tax (GST) and Direct Tax Code (DTC) proposed by the government which is likely to be implemented by April 2012, there will be far-reaching changes in the system of taxation and income tax laws of the country. As such GST and DTC will have a bearing on every citizen of this country, on companies and corporates and also on the NRI’s who will be anxious to know in what way it will impact them. It will just be a matter of few months before DTS and GST becomes a reality in our country.

Daijiworld.com spoke to G Ramaswamy to know more about these proposed bills, career opportunities in CA and efforts of ICAI to rope in more youngsters towards the profession in Mangalore and other parts of the country.

11. Coming to the Goods and Services Act (GST) can you elaborate what necessitated the introduction of GST?

Indian economy is gearing up to usher in the most awaited and significant indirect tax reform post-independence in the form of Goods and Service Tax (GST). Introduction of the Goods and Services Tax will lead to integration of goods and service taxation resulting in a world class tax system and improve tax collection. Presently there are parallel systems of indirect taxation at the Centre and State Levels. Each of the systems needs to be reformed and eventually get harmonized.

12. What is the basic structure of GST?

India would adopt a dual model GST with Central GST (CGST) implemented by Central Government and State GST (SGST) implemented by State Government. CGST would subsume all major indirect taxes levied by the Central Government i.e., central excise duty, central sales tax and service tax and SGST will subsume principal taxes levied by the State Government i.e., VAT, purchase tax etc. In this regard, tax on petroleum products and alcohol are intended to be kept either outside GST or will be taxed separately. GST would have a four-rate structure with standard rate, concessional rate, special rate for bullion and jewellery and exempted/ nil rate. The rates are expected to be in the range of 12% to 18% considering both Central GST and State GST.

13. In what way is it different from the present tax system?

GST will subsume central taxes such as excise duty, service tax, central sales tax and State taxes like octroi, VAT, stamp duty, purchase tax etc. to eliminate the cascading effects of multiple layer of taxation. GST is proposed to facilitate seamless credit across the entire supply chain and across all states under a common tax. Uniformity in tax regime with only one or two tax rates across the supply chain would make the tax structure simple & transparent. It is expected to give more relief to industry, trade and agriculture through a more comprehensive and wider coverage of input tax set off and service tax set off besides providing a level playing field to domestic producers by removing tax distortions and tax competitions.

14. There seems to be an opposition from states to the GST? Is it because states are going to lose on the revenues?

Principally, all States agree to the concepts of Goods and Service Tax. However, there are apprehensions on account of probable revenue loss. The issue is being discussed by the State Governments as also at the Empowered Committee of State Finance Ministers. Central Government has assured States that revenue loss would be compensated.

15. What is the impact of GST on business community?

GST would be beneficial to the larger interest of business community by providing a more comprehensive and wider coverage of input tax credits and by subsuming majority of the indirect taxes within its ambit. Consequent to elimination or reduction in the cascading effect of taxes, the cost of doing businesses would be reduced and the system would also become more transparent.

16. Is it going to give a fillip to the economy which is going through a bad phase?

Yes. GST will give a boost to the economy. It is expected that the implementation of goods and services tax (GST) could increase the country's GDP by about 2 per cent annually.

17. Will GST prove to be a panacea for all the ills?

The GST at the Central and at the State level will give relief to industry, trade, agriculture and consumers through a more comprehensive and wider coverage of input tax set-off, subsuming of several taxes in the GST and phasing out of CST. With the GST being properly formulated by appropriate calibration of rates and adequate compensation where necessary, there may also be revenue/ resource gain for both the Centre and the States primarily through widening of tax base and possibility of a significant improvement in tax compliance. In other words, the GST may usher in the possibility of a collective gain for the industry, trade, agriculture and common consumers as well as for the Central Government and the State Governments. The GST may lead to the possibility of collectively positive-sum game.

18. Is it true that ICAI has decided to do away with common proficiency test (CPT) for B Com graduates to enable them directly appear for CA as CPT is the first hurdle which many students fail to clear?

The Council of the Institute has taken a decision to exempt Commerce Graduates/Post Graduates with minimum 55% or its equivalent grade having studied any three full papers of 100 marks each out of Accounting, Auditing, Law including Business Laws, Mercantile Laws, Corporate Laws etc., Economics, Management including Financial Management, Personnel Management etc., Taxation including Direct Tax Laws, Indirect Tax Laws etc., Costing, Business Studies, Business Administration and Management Accounting. Other Graduates/ Post Graduates (not falling above) with 60% marks are also eligible to appear for CA exam directly. Students who have passed Intermediate level examination of the ICWAI/ ICSI are only exempted from appearing from the CPT and can commence their articled training on passing Group I of IPCC.

19. It is said that there is shortage of almost 1 lakh CAs in our country. Considering this, what is ICAI doing to encourage more and more students opt for CA exam?

The Chartered Accountancy is a highly prestigious course which provides ample opportunities to students coming from any stream. It is a well-known fact that CA is the most economical course and requires a reasonable sum of money vis-à-vis any other professional course. Therefore a large number of students have been registering for this course with the Institute since its inception. However, the ICAI has initiated steps to create awareness and explain the different aspects of the course amongst the potential students across the country through various measures. Information is provided to potential students through literature, seminars, counseling (both parents and students through our 5 Regional Councils and 126 branches of the institute.

20. An increasing number of CAs are opting for joining firms rather than practicing. Is it a good trend?

The Chartered Accountants in India are authorized to conduct audit of financial statements under the Companies Act, 1956, Income Tax Act, 1961 and various other statutes in India. However, not all Chartered Accountants work in audit. Firms of accountants provide varied business services - their areas of expertise include financial reporting, auditing and assurance, arbitration, risk management, economics, corporate finance, management accounting, information systems audit, corporate law, direct tax, indirect tax and valuation of businesses etc.

The role of CAs is changing. “They are no longer mere tax advisers who attest financial statements as auditors. More and more assignments are coming seeking business advices. CAs are now involved right from business planning to restructuring M&As, cost optimization, funding and capital advisory services for a greater value addition to the resources”. As a result of the varied professional opportunities coming up in the recent years, the practitioners are also growing in numbers.


Comments on this article
monthi, mangalore/bahrainMonday, October 10, 2011
I just want to ask, by implementing above mention tax,has there is any benifit to the common person or it's a burden.
Comment on this message     

fabian, MangaloreSaturday, October 08, 2011
I am not a economist, hence i do not understand these complications. But i do know that in UK, Greece, India the consumers have to pay 12.5 - 21% VAT (value added tax) but in countires such as Australia, Newzealand and US the consurmers pay 10 - 14% GST (goods and services tax. I hope when the govt. introduces the GST they will get rid of the VAT or else the consumers will be robbed in broad day light.
Comment on this message     

Ruchir Agarwal, MangaloreSaturday, October 08, 2011
Well I personally feel the GST should be collected at the cost price replacing the CST .If its to be collected at the MRP or selling rate of retailor its going to be v difficult to sell goods as customers will feel the pinch and may refuse a bill or to pay excess of 12 to 18%.
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