Taxation Department- Power Exercise Scenario (Upliftment of economy in a righteous way)

Appointment and Delegation of powers

 The tax administration of Assam was being carried on in a disciplined way within the ambit and competence of the taxation laws, operative in the State. There are as many as nine taxation laws eight of which were enacted by the State Legislature, while one being by Parliament. Each law plays the pivotal role towards the augmentation of revenue to the State Exchequer. The Commissioner of Taxes, Assam is the supreme authority for the purpose of administration of the taxation laws and is appointed by the Government of Assam for the purpose of carrying out the purposes of the Act along with the officials of different cadres right from the rank of the Additional Commissioners of Taxes to the grass root level, the Inspectors of Taxes, specifying the area of functioning in respect of each of the officers. The Commissioner is equipped with the supreme powers to carry on the administration of the Acts, while for the smooth conduct of the administration; he has been empowered to delegate his powers to the officers, appointed to assist him befitting to their status, subject to the conditions and restrictions, as envisaged in the Acts and the rules framed thereunder. It is the prerogative of the Commissioner to assign the powers, to detail the functions of the taxing authority to the best of his judgment in consideration of the knowledge of law, working ability and other allied factors. In the past, the posting of the officers in the important revenue areas were made in consideration of seniority and capability to run the revenue administration, beset with, the neck of proper collection of revenue including the arrear taxes as well as to prevent, detect and arrest the evasion of taxes by the tax dodgers. A dossier of the officers was maintained thereon. As the days are going on, such mode of consideration has been taken a good bye. In the past, the opinion and recommendation of the Commissioner in the matter of posting and transfer, used to gain priority, but now in reverse to that the political views and recommendation are gaining the momentum in many cases. The posting of officers in the check posts and other important areas depends on the choice of the officers and not in the interest of public service. Naturally, erosion has been taken place in the proper and zealous functioning and there has been gradual deterioration of the administration. The Commissioner sometimes fails to exert power and a set-back becomes obvious.

Duties and resposibilities

The duties and responsibilities of the taxation officers have been widely tabled. In a brief (i) an Inspector of Taxes is meant for survey, inspection, checking, preventing and arresting  the evasion of taxes, collection of particulars from different sources for the purpose of verification of the same in the field as well as to take note at the time of assessments of taxes, besides other allied works; (ii) an Assistant Commissioner of Taxes or a Superintendent of Taxes of the unit is responsible for registration of a dealer, for realizing security money to ensure proper payment of tax and proper custody of statutory declaration forms; to make assessment and realization of tax including the arrears taxes, inspection, checking  and detection of evasion of taxes; general supervision of administration in the area and other allied works; (iii) a Deputy Commissioner of Taxes of the zone is to supervise the works of the officers of the units in all spheres including inspection of offices, looking into the position and progress of  collection of revenue with arrears, chalking out special drive for collection of revenue including the arrear taxes and maintenance of liaison with the Commissioner of Taxes,(iv) Deputy Commissioner of Taxes (Appeals) is to function as the appellate authority against the order of assessment imposition of penalty, passed by the Assistant Commissioners of Taxes and the Superintendents of Taxes, when aggrieved by a dealer,. The powers and functions of the Deputy Commissioner (Appeals) are independent and he is not act  by virtue of the powers by the Commissioner, but under the statute of law; (v) Joint Commissioner of Taxes is to discharge the powers and functions, assigned by the Commissioner on different subjects, to make inspection of the subordinate offices, hear revision petition and other allied matters; (v) Additional Commissioner of Taxes is to render assistance to the Commissioner in different matters including inspection, general and law administration,  hearing of revision petition and other allied matters. Each of the officers except the Deputy Commissioner(Appeals), as stated above, is equipped with the powers, delegated by the Commissioner befitting to their status as well as in consideration of the administrative needs.

Enforcement wing

(Repeal Act)

An Enforcement wing was created in the taxation department in the year 1964 for the purpose of checking, preventing and arresting evasion of taxes. In fact, there was no specific provision in the sales tax laws operative in the State to create such wing at the relevant times and the same used to run as a matter of convention. The wing was centrally operated, being manned by one Assistant Commissioner of Taxes with numbers of the Superintendent of Taxes and the Inspectors of Taxes, subject to the supervision and control of the Commissioner of Taxes. An Inspector of Taxes was posted in each unit for the purpose of collection of information and to provide assistance in different aspects to the central wing. In 1967-68, the said wing was decentralized and each zonal Assistant Commissioner was entrusted to head the zonal wing in their respective zones with the Superintendent of Taxes and Inspectors of Taxes placed at his disposal. In the year 1981, in addition to the existing set-up, another Enforcement wing was created centrally under a Deputy Commissioner of Taxes with the numbers of the Superintendent of Taxes. There had been complaints at different corners about the mal-functioning of the officers of the central wing as well harassment to the traders. A section of traders and professional personnel were on the heels to abolish the Enforcement wing. They could manage the bureaucratic and the political set-up of the relevant time and succeeded to dismantle this important wing including the zonal level wings late in December, 1983. Instead of bringing the officers, alleged to have been involved in mal-functioning, to book, the abolition or withdrawal of the wing was unfortunate and was detrimental to the interest of the State revenue. The officers might be bad, but the aim and object of the wing was revenue oriented. The funniest part of thing is that, the Government did not revive the said organization during these long 31 year and encouraged a section of unscrupulous traders to move freely towards evasion of taxes.

(AGST Act)

Previously, four taxation laws in relation to the sale and purchases of the goods were operative, but the same were amalgamated, consolidated to give birth to a single Act, namely; the Assam General Sales Tax Act, 1993 (AGST) with effect from the 1st July, 1993. This Act empowered the State Government (Government of Assam) to constitute a Bureau of Investigation or Vigilance or Enforcement wing consisting of the Officers, appointed by the Government for the purpose of collection of intelligence, enquiry and investigation in connection with the evasion of taxes. A vigilance group was constituted by the Commissioner of Taxes and the officers comprising of such group, were delegated with the powers, but the same was not constituted by the State Government, as laid down. The officers entrusted in the group as well created some displeasure in the name of checking of evasion of taxes, which created out rage amongst the different section of tax payers.

(VAT Act)

The AGST Act was repealed and in its place the Assam Value Added Tax Act, 2003 (VAT Act) came into operation from the 1st May, 2005. In the said Act, a provision to create a vigilance wing was incorporated as well. Unlike the AGST Act, the power to constitute a vigilance wing was vested to the Commissioner, but such group is to be constituted out of the officers, appointed by the State Government to assist the Commissioner. The vital part of such appointment is that the territorial jurisdiction of the officers is to be specified in such appointment made by the Government. The constitution of the vigilance wing by the Commissioner, therefore, has a pre-condition that the appointment of the tax officers for carrying out then purposes of the Act must contain the territorial jurisdiction, as notified by the Government. While constituting such vigilance wing the Commissioner can not specify the area out of his own, but it is relevant to the appointment. Within five days of coming of the VAT Act into force, the Commissioner by a notification delegated his powers to a set of officers to exercise powers under the said Act. The salient feature of such delegation of power was that, it was not preceded by any notification pertaining to the appointment made by the Government with the territorial jurisdiction. The said notification seemed to be not proper in the eye of law. However, with the transfer of the entire group of the officer, this wing ceased to function.

The delegation of power, as stated in the pre-para included,  inter-alia,  the power to make provisional assessment, re-assessment on the escaped or evaded taxes, to undertake the special mode of recovery, to levy interest, to purchase goods in case of under valuation, to compound offence, to impose penalty etc. Actually, the doctrine of separation of power, as envisaged in the Constitution and the definition of the term ‘Superintendent’ left no scope for such delegation of powers of assessment, re-assessment, imposition of penalty etc. Apparently the said delegation of power suffered from shortfall and impropriety.

Functioning of taxing authorities without legal authority

Presently, there is no such vigilance wing, constituted by the Commissioner in the manner, discussed above. It has been, however, learnt that a set of officers are being detailed to roam and function in the matter of inspection of the traders’ business premises, godown, transporters’ godown premises, to make interception of the goods vehicles and inspection thereof throughout the State of Assam. No appointment of such officers under the Act with the territorial jurisdiction was made by issue of notification by the Government and no delegation of power was conferred by the Commissioner in this respect. This seems to be a unique way of functioning currently, where the legal provisions have been given a good bye and some unwritten jungle laws have been introduced.

We have full moral support to undertake checking activities with drastic measures against the tax dodgers, but as a retired officer of the taxation department having prolonged profound experience in the taxation department, we do not deem it proper to keep our eyes closed on such ways of functioning, having no legal base or entity. We have no other ways, but to express our views in writing no matter if it reaches to the deaf ears. The proceedings undertaken for registration, requiring furnishing of security, orders pertaining to assessment, re-assessment, rectification of assessment, penalty, compounding of offences etc. by the officers, suffer from immense lacunae and are found to be fallacious. There is no effort or endevour to make the new comers adequately trained up for want of requisite infrastructure, such as providing training, holding workshops etc.

Conclusion

The prosperity of a State largely and fully depends on the utilization and mobilization of the resources available at its disposal and to make proper use thereof. The revenue collection is always incremental, but the trend of evasion leaps no bound. Unless the tax machinery is active and sincere and moves in a proper and righteous way, the drainage of revenue will continue by way of tax dodging activities.

(Mrinal Kanti Chakrabartty)

       Guwahati-24

Sales during the Movement of Goods From one State to other By Transfer of Documents to the Title of the Goods (An analysis and discussion)

Setting up of the check posts-functions thereof

The Government of Assam set-up a number of check posts, inter-alia, at the inter-State border points of Assam and erected barriers with a view to preventing or checking evasion of taxes. The Government as well appointed the taxing authorities for carrying out the purposes of the Acts, namely, the Assam Value Added Tax Act, 2003 (VAT Act) and the Central Sales Tax Act, 1956 (Central Act). The ‘Officer-in-charge of the check post’ is the persons, appointed by the State Government and posted at the check post . Such officers are not to be below the rank of the Superintendent of Taxes. Each check post is to be manned by a set of officers in the cadre of the Inspectors of Taxes for the purpose of smooth operation of the check post round the clock by way of stopping the goods vehicles, keeping the vehicles stationary, as long it is necessary, opening the package or packages to ascertain the correctness and accuracy of the goods carried, if necessary and also to inspect and examine the records and documents so as to ensure that there is no evasion of taxes. A part from the power of operation of the check post, the officer-in-charge of the check post has been equipped with the power requiring production, inspection of books of accounts, search and seizure in the territorial jurisdiction of Assam. In such an exercise, when there is any doubt in relation to the movement of such goods, the Officer-in-charge of the check post has the power to detain the vehicles and when any evasion of taxes is established due to adopting of some malpractices, unfair or fraudulent means under the Acts, such Officer-in-charge has the power to seize the goods, which can be released only after the evaded tax and the penalty are paid or realized. When such tax levied and penalty imposed are not paid, the Officer-in-charge of the Check post has the power to dispose of such seized goods by way of public auction and to credit such auction money pertaining to the sale value of the goods into the State coffer.

Delivery Notes, Road permits and Transit Passes

(i) An owner or a transporter, importing any goods for the purpose of sales inside the State of Assam, is to furnish a Delivery Note, obtained by the importer dealer from the Superintendent of Taxes of the area before the Officers-in-charge of the check post with the declaration that the goods will be accounted for properly and the taxes, as due will be paid. (ii) When any goods are imported by a person for consumption or use, a Road permit, obtained in the same manner from the Superintendent of Taxes of the area is to be furnished before the Officer-in-charge of the check post. (iii) When any goods enters into the State of Assam from the places out side the State of Assam and moves to the other State or States through the corridor of Assam, the owner of the goods or the transporter is to obtain a Transit Pass on application from the Officer-in-charge of the entry check post of Assam, for each consignment of the goods and  to produce the same before the Officer-in-charge of the exit check post and to obtain endorsement thereon before such goods are moved to the places out side the State of Assam. The said endorsed Transit Pass has to be surrendered before the Officer-in-charge of the entry check post.

Liability to pay tax

When any consignment of goods, taxable under the Act, is imported, the owner of the goods (dealer) is to pay tax on the sale value of such goods. When any person imported any goods for own use or consumption on presentation of any Road Permit, he is liable to pay tax under the Assam Entry Tax Act, 2008 (Entry Act), if the goods are taxable under the said Act. When any person obtaining the Transit Pass, fail to surrender the same before the Officer-in-charge of the entry check post with the endorsement of the Officer-in-charge of the exit check post within the specified period of thirty days, the Officer –in-charge of the entry check post is to presume that the goods did not move to the places out side the State of Assam, as designed and the same was consumed in the State of Assam, he is to levy tax and impose penalty after providing an opportunity of being heard.

Sales of goods in the course of inter-State trade or commerce

The Central Act is to govern the procedure of levy of tax on the sales of the goods made in the course of inter-State trade or Commerce. The said Act has provided relaxation (or exemption) in the matter of levy of tax in respect of the sales of goods, effected by transfer of documents to the title of the goods during the movement of such goods from one State to another, export of goods out of the territory of India, sales of goods made to the exporter in the course of export, movement of goods made to places out side the State of Assam not by virtue of sale in the course of inter-State trade or commerce, but by way of stock transfer. Such relaxation (or exemption) is, however, not admissible as a matter of right, but it is subject to scrutiny and examination on the merit thereof.

The sales or purchase of goods in the course of inter-State trade or commerce are of two folds, namely; (a)  by occasioning the movement of goods from one State to other; (b) effecting sales by way of transfer of documents of the title of the goods during the movement of the goods from one State to another. The provisions of the Central Act further made it clear that where any goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purpose of (b) above,  is deemed to have commenced at the time of  such delivery and terminate at the time, when the delivery is taken from the carrier or bailee.  Apparently, therefore, the sales made by way of transfer of documents to the title of the goods can as well be affected, when the goods are placed with the carrier for onward movements after the first sale is affected. The Central Act further provided that when any sale of goods is affected by transfer of documents of title to such goods during their movement from one State to another, any subsequent sale made during such movement by transfer of documents of the title to the goods to the registered dealer, shall be exempted from tax under the Central Act, subject to production of the requisite documents/declaration in this behalf.

Sales by transfer of documents to the title of the goods-procedure thereof

(i) A sale of goods, when affected between two dealers and moves to the first purchaser of such goods, the first purchaser may enter into a contract of sale or supply with a second purchaser in respect of such goods. The said first purchaser in that case may make the sale of the said goods to the second purchaser by transfer of the document to the title of the goods during the movements of such goods by way of making endorsement of the documents relating to such goods to the second purchaser of the goods. Any delivery taken by the first purchaser and thereafter re-booked and despatched to the second purchaser, will foil the purpose of such subsequent sales by way of transfer of documents to the title of the goods and it amounts to be a fresh sale.

(ii) A section of the first purchaser use to make contract of sale with the second purchaser before the first sale is affected and advises the first seller to send the goods to the destination of the second purchaser. The first seller, while making the despatches of such goods direct to the address of the second purchaser, in some cases even use to despatch such goods in the name and address of the second purchaser and consign such goods to the destination of the second purchaser on self consignment basis or in the name of the second purchaser of the goods.

Such deal amounts to be a pre-determined sale and not a sale by way of transfer of documents of the title of the goods during the movement of such goods. The so-called sale or purchase of such goods; can not thus be termed as sale during the course of movement of the goods. The entire concept of sale in the course of movement of goods in such case is beyond the spirit of the Central Act and the purpose is thus obviously defeated.

Procedure of sales by way of transfer of documents of the title to the goods

The actual procedure pertaining to the sales of goods by way of transfer of documents of the title to the goods during such movement of goods are, as below:

(i) In the normal course, the sale made by the first selling dealer to the first purchasing dealer, who is to be a registered dealer, is to be supported by a declaration in Form ‘C’ to be furnished by such first  purchaser to the first seller, making it convenient to get the benefit of tax at the concessional rate.

(ii) In the case of the sales by transfer of documents to the title of the goods, the first purchaser without taking the delivery of the goods, is to make endorsement in the Consignment Notes (viz Road Receipts, Railway Receipts, as the case may be) in favour the second purchaser, making it convenient on his part to take delivery of such goods;

(iii) The first purchaser (second seller) is to collect Form ‘C’ from the third purchaser and is to obtain a declaration in Form E-I from the first seller so as to establish his claim of sales by way of transfer of documents so as to derive the benefit of exemption of tax. If such declarations are not furnished and the transactions are not made in accordance with the procedure, laid down, the benefit of any exemption of tax under the Central Act by the first purchaser, that is, the second seller of the goods; will not be admissible.

(iv) In relation to such deal (sale by way of transfer of documents of the title of the goods), there should not be any variation of the quality and the quantity of the goods.

Mysterious ways of sales

Of late, it could be learnt that a section of traders, industrial organization and the public sector undertakings are importing the goods including the tools, equipments, machineries etc by trucks from the places out side the State of Assam for consumption or use within the State of Assam. The invoices in relation to the purchases of such goods and the consignment notes covering the movement of the goods by trucks contain three names and addresses. One is the first out side the State of Assam, the other is the second person in Assam and the third one is the person/organization within the State of Assam. This was learnt to be a unique way of movement of the goods. When the existence of such three persons in the same deal, came into question, they are said to have explained mysteriously that these are the E-I sales deal and the middle person is exempted from any tax and last person is liable to pay tax under the Entry Act. Assuming that it was alleged to be an E-I sale (though such term is misnomer), how the name of the third party   (second purchaser) could take berth in the original invoice and the despatch documents (viz in the Consignment Note)? The existence of the third party in the original invoice and the despatch documents obviously construes that the sale made to the third party was pre-determined and, that too, before the original movement of the goods was affected. As already discussed, this deal can not achieve the quality and character of sale in the course of movement of goods by way of transfer of documents to the title of the goods (in the language of the party/parties E-I sale of goods). The second party is, therefore, not entitled to any benefit of exemption of taxes under the Central Act. A number of such parties could not face such legal stand and the second party had to pay tax on the value of the goods and penalty for adopting such fraudulent means. Though the actual magnitude of the tax and penalty could not be ascertained, it extended to some lakhs of rupees.  This seems to be a big achievement on the part of the Officer-in-charge of the check post in Assam. The self-seeking tax-dodgers, therefore, designed their new way of action.

Circular, issued by the Commissioner of Taxes

The Commissioner of Taxes, Assam at the instance of the Tax Bar Association, Public Sector Undertakings, dealers issued a circular No.4/2014 on the 30th day of June, 2014, the contents of which are, as below :

“Of late several representations from the Tax Bar Association, Public Sector Undertakings and dealers have been received regarding detention of vehicles carrying goods meant for E-1 transaction at the check post o the ground that the delivery note attached with other supporting documents was not issued by the first buyer in Assam but the subsequent buyer. The matter has been examined and the department is of the view that in case of vehicles carrying goods meant for E-I transaction, the check post authority shall also accept the delivery note/road permit issued by the subsequent buyer. Non acceptance of the statutory Form by the check post authority issued by the subsequent buyer may also result in loss of revenue in the form of entry tax payable by an importer to the department.

Henceforth, a check gate authority shall not detain any vehicle carrying goods meant for E-I transaction and levy tax, penalty on the technical ground that the statutory form was not issued by the first buyer in Assam but by the subsequent buyer. In case any doubt or dispute, he shall refer the matter to the Apex office without detaining the vehicles for necessary action.”

The contents of the circular seem to be most amusing. It seems to be a product of representations made from different angles, as reflected above. There is, in fact, no term E-I sale in the Central Act, but the real term is ‘sale in the course of movement of goods by transfer of documents to the title of the goods.’ Primarily, the term E-1 sale used in the circular was a misnomer and it lacks legal support. E-I Form is one of the instruments to provide exemption of tax on such sales in course of transfer of documents and it can-not be termed itself as sale. As the tax-dodging preventive machinery at the inter-State border, the Officer-in-charge of the check post is bound to examine the mode of the deal and genuineness thereof and when any iota of doubt takes place in his mind, he has the full authority to detain the vehicle for the purpose of further enquiry or investigation. If after such enquiry or investigation, the circumstances are so warranted, the Officer-in-charge of the check post shall have no other alternative but to resort to measure of levy of tax and imposition of penalty.

From the tone of the circular, it transpires that the pertinent question involved in the matter was on the genuineness of the deal of sales during the course of movement of goods was ignored. It was already discussed that such sales affected during the course of movement of the goods can not be pre-determined. If the original booking documents and other connected papers like challans, invoices were pre-destined, this can not be other than a pre-determined sale and the interim dealer (the first purchaser of the goods) can not escape from the liabilities to pay tax. Mere payment of tax under the Entry Act is not enough and non-submission of Delivery Note can not be a technical ground and it is not proper to draw up such conclusion. The Officer-in-charge of the check post is the best authority to exercise his prudence and apply  his best judgment and there should not be any interference at any level. The taxation laws provided wide scope to file appeal or revision petition by a dealer, when aggrieved by any order of the taxing authorities. Hence, the representations from various angles, as stated and the circular issued thereon amounts the curbing the power of the Officer-in-charge of the check post in matter of prevention and checking of evasion of taxes. This may be construed to be premature, prejudicial besides being detrimental to the interest of the revenue of the State.

We hope, a review may be made on the entire episode after examination of the facts and materials for the best interest of the revenue of the State.

 

Restriction Of Input Tax Credit And Admissibilty Of Tax Set-Off On Liquor And Tea (Causing drainage of revenue)

The levy of tax on the sales or purchases of the goods within a State along with the other allied and ancillary matters is governed by the Assam    Value Added Tax Act, 2003. ‘Value Added Tax’ means ‘a tax on the sale of any goods at every point in the series of sales made by the registered dealer with the provision of credit of input tax paid at the points of previous purchases thereof’. ‘Output -tax’ in relation to a registered dealer means ‘the tax charged or chargeable under the Value Added Tax Act in respect of the goods sold by a dealer’. ‘Input -tax’, on the other hand, means- ‘the amount paid or payable by way of tax under this Act by a purchasing registered dealer to a selling registered dealer on the purchase of goods in the course of business.’  ’The ‘Out put tax’ and ‘the Input tax’ are the two sides of the same coin. The former is a tax on sales of goods, while the latter is a tax on the purchases of same goods without any numeral change. For the seller it is an out-put tax and for the purchaser it is an input tax.

         The Value Added Tax (VAT) is thus a tax, which is to be levied on the series of sales made from the manufacturers’ level to the consumers’ level or from the importers’ level to the consumers’ level. Such tax is to be levied at each stage of sale, subject to credit of input tax paid at the time of the previous purchases made. The State gets the rightful and legitimate tax on the deals; the traders are benefited by making payment of the difference of the amount of tax; but the burden of multiple of tax is to be shouldered by the consumers, which results in heavy price hike of the commodities.

         By making a deviation on the principle of VAT law even without any proper explanations thereof, a series of goods were brought under the purview of the First point sale of goods in Assam in the Fourth Schedule of the said said Act. Crude Oil, Petrol, Diesel, Petroleum products, Foreign liquor, (whether made in India or not), Pre-owned cars, Tea and many other commodities were identified in the first point tax-net of Assam, meaning thereby; that no tax is payable on the subsequent sales of such commodities, subject to discharge of onus that the taxes were paid at the point of the first sale made in Assam.  No in-put tax credit is admissible in respect of the tax paid on the previous purchase of such goods, covered by the Fourth Schedule of the VAT Act, as laid down in section 14 (1) of the said Act.

       Our point of discussion in this instant paper is on the question of input tax credit/ set off in respect of two commodities, namely; ‘Foreign Liquor’ and ‘Tea’. An idea on the concept of input- tax credit has been given above. ‘Set-off’ means a thing heightening the quality by contrast, to serve as a contrast or foil for enhance. Sub-Section (6) of Section 14 of the VAT Act of Assam laid down- “No input tax credit shall be claimed by a registered dealer or shall be allowed to him for- the tax paid purchases of goods used in exploration, extraction, manufacture, processing or packing of goods specified in the First and Fourth Schedule (First Schedule contains the list of the goods, exempted from tax, while the Fourth Schedule is in relation to the goods taxable at the point of first sale in Assam.)  Naturally, therefore, the input credit taxes are not admissible on the sales of Foreign Liquor and Tea, sold in the State of Assam in view of the restriction, imposed.

            That being the spirit of the VAT Act, some contradictory provisions are found to have been incorporated subsequent to the original enactment:

            Potable liquor- Section 10 (1A), was incorporated in the VAT Act, which reads:- “Notwithstanding anything in this Act, the retail ‘on’ license holder for potable liquor mentioned in the fourth Schedule, except country spirit, shall pay out- put tax on sale made by him at the applicable rate specified therein and he shall be eligible for set-off of the amount of tax paid by him at the time of purchase of such potable liquor from the bonded warehouse.”

          Tea- Clause (iii) of sub- section (3) of Section of the VAT Act was amended and reads- “A dealer, who purchases tea through such tea auction centre and then sells such tea inside the State shall be deemed to be the first point seller and he shall be entitled to get set-off of the amount of tax paid on purchase, from the amount of tax payable by him on sale under this Act”.               

          Section 10 of the Act is a tax charging measure. It provided the power of levy of tax on the sales of the commodities, as per the Schedules, annexed to the Act. There ought not to have been question of allowing any set-off of the tax, side by side. In the said Section of the Act, it was specified that the inter-se-sale of the petroleum products from one Oil Company to the other, are not to be treated as the first point of sale in Assam and no tax was chargeable or leviable on such sales, subject to production of a declaration in this respect. This is obviously a departure from the real spirit of the said law.  This seems to be a unique exercise in the tax scenario of Assam. In the case of potable liquor, however, the tax was to be charged and paid, but it was subsequently inserted that the taxes, so paid, will be admissible for set-off. Likewise, in the case of tea, the tax was to be charged, paid and the amount of tax so paid is admissible for set-off.

          There seems to have been some extra curriculum activities ignoring the basic principle and all such enactments/amendments were designed to provide fiscal benefits to the traders at the cost of revenue of the State. Consequently, there has been huge drainage of revenue years after years from the State Exchequer. The State tax machineries ought to have examined these practical aspects of law and to come forward so that the revenue of the State is properly safe-guarded.

           In fact, liquor and tea have multifarious stages of sales and the State could have earned a substantial amount of revenue on such series of sales, but mysteriously enough, the said commodities were brought under the purview of the first point tax -net of Assam with provisions for set-off of the amount of tax paid, which obviously paved the way for the loss of revenue.

On way to GST regime

"A march to the Goods and Services Tax Regime"
Shri Mrinal Kanti Chakrabartty, a retired tax officer of the Government of Assam, is now on the heels to publish his 15th book, namely; ‘On way to GST regime’. This book contains a chronological history on the tax measures in Assam since 1939, that is, during the British era. The present taxation laws operative in Assam also got berth in this book. The original Assam sales tax laws were dismantled from time to time and the VAT Law is now operative in Assam since 1st May, 2005. While appreciating the VAT measures in the country, Shri Chakrbartty maintained that the VAT regime has forced the consumers to shoulder a heavy burden of multiplicity tax element in each stage of sale and there had been an unprecedented price hike of the commodities, which tortured them economically. Out of his prolonged experience, he also pointed out some set-backs, faulty ways of action, in legal, practical and technical aspects in the VAT Law, operative in Assam.
According to Shri Chakrabartty, the proposed GST regime will provide fiscal relief to the consumers to a great extent, as there will be no consecutive charge of tax in each sales deal, but only the difference will be reckoned.
This Act will be a conglomeration of Central and State tax measures. A drastic change of the Constitution of India will naturally be necessary for introduction of the consolidated Central and State taxation law.
The new tax law, as Shri Chakrabartty felt, is likely to be enacted by Parliament and the Government of India (Central Government) will be the chief architect of such tax measures. The State Governments are likely to administer the State tax measures under the direction and guidance of the Central Government. He apprehends that, if it practically happens so, the economic sovereignty of the States will likely to be seized. The role of the State Governments in that case will be cipher and the States will be dependable on the Central Government in different aspects.

PROSPECTIVE IMPACT ON THE PROPOSED GST REGIME IN INDIAN SUB-CONTINENT

Sub-clause (3) of clause 100 read with entry 48 of the Government India Act, 1935 empowered the Provincial Legislatures of the British ruled India to make laws on the specified subjects. In Assam, the first tax laws were enacted 1939 on the sales of petroleum, on agricultural income and on amusement and betting. With the evaluation of time, a series of taxation laws were introduced in the post independent era. At present, as many as eight State tax laws and one Central tax laws are operative in Assam. These tax laws are- (i) on the sales and purchases of goods, the Value Added Tax or VAT, (ii) entry of goods, (iii) professions, trades, callings and employments, (iv) amusement and betting, (v) specified lands, (vi) Luxuries provided in Hotels and Lodging Houses,(vii) agricultural income, (viii) electricity and central sales. The VAT law has been operative in Assam since 1st May, 2005. It is a broad -based tax. The perimeter of the VAT is wide and each State has its own law on VAT.

The Government of India, since some couple of years has been contemplating to introduce a new tax measure in the States of the Indian sub-continent. An ardent exercise is going on to materialize the venture by introducing the Goods & Services Tax (GST). It seems to be a refined form of VAT, but it is intended to make the base more wide multifarious designed. A part from the tax on sales and purchases of goods, a number of tax measures on State and the Union tax are proposed to be merged to give birth to a unified tax law.

GST is not simply VAT plus Service tax, but it seeks a recast and renovation on VAT. GST is a tax on the goods and services with the comprehensive and continuous chain of set-off benefits from producers’ as well as service providers’ level upto the retail sellers, so as to say, the consumers’ level. It is essentially a tax on the value addition at each stage and a supplier at each stage will be eligible for set-off, through a tax credit mechanism. The GST purchased goods and services are available for set-off on the GST to be paid on the supply of the goods and services. The consumers will bear the burden of last tax (GST), charged in the supply chain only. The multiplicity of tax component is not to be occurred, which will have the consequential effect that the price hike burden to the consumers will be lesser. The illustration, given below, will make the position clear-

GST at the manufacturers’ level- (i) purchase value say, Rs. 100.00, (ii) value addition Rs. 30.00,(iii) sale value of the goods and services Rs. 130.00, (iv) tax rate 10 paise in the rupee,(v) GST(out put tax) Rs. 13.00, (vi) input tax credit Rs. 10.00, (vii) net GST (out put tax) Rs. 13.00- (input tax credit) Rs. 10.00= Rs.3.00. Unlike Rs. 13.00 in VAT, out put tax is to be charged at Rs.3.00.
GST at the whole selles’ level -(i) purchase value say, Rs. 130.00, (ii) value addition Rs. 20.00 (iii) sale value of goods and services Rs. 150.00 (iv) tax rate 10 paise in the rupee, (v) GST (out put tax) Rs. 15.00 (vi) input tax credit Rs. 13.00, (vii) net GST (out put tax) Rs. 15.00 –(input tax credit) Rs. 13.00= Rs. 2.00. Unlike Rs. 15.00in VAT, out put tax is to be charged at Rs. 2.00.
GST at the retail sellers’ level- (i) purchase value say, Rs. 150.00, (ii) value addition Rs. 10.00 (iii) sale value of goods and services Rs.10.00, (iii) sale value of goods and services at Rs. 160.00 (iv) tax rate 10 paise in the rupee, (v) GST (out put tax) Rs. 16.00 (vi) input tax credit Rs. 15.00), (vii) Net GST (out put tax) Rs. 16.00 – (input tax credit) Rs. 15.00= e. 1.00. Unlike Rs. 16.00 in VAT, out put tax is to be charged at Re.1.00.

So, unlike VAT regime, the price level is likely to go down and the consumers will be benefitted. The distinction between VAT and GST is that : (a)VAT provides multiplicity of tax at each stage of sale; (b) Payment of sale price on inclusion of the value added tax;
The GST provides that:(a)The difference of tax is payable; (b) A transparent and complete chain of set-off is maintained.

It is likely to widen the coverage of tax base and improve tax compliance. The higher generation of revenue with the lower burden of tax element to the consumers seems to be the moto of the proposed GST regime.

The Central Excise Duty is in fact, leviable at manufacturing point before removal of the goods from the manufacturing spot and such Excise Duty is to be collected and deposited, when the goods are removed from the business premises. The Service Tax is charged on the date of handing over of service or on the date of receipt of payment, whichever is earlier. The VAT, on the other hand, is to be charged at the time of sale of the goods, whether the payment is readily made or there is deferred payment. The GST will ease out such matters. The GST is to be charged on each transact.

The items of taxability in the GST system will be, as below:
(a)on the sale of goods; (b)incorporation of goods in an individual contract; (c)hiring a taxi;(d) hiring equipment; (e)lease of a premises; (f)consultation by a chartered accountant; (g)import & export of the goods; (h)) rendering of any service; an (i)) a transfer of immovable properties etc”. So, its perimeter will be wider.

The GST being chargeable on each transaction, it may also be called as the’ transaction tax’. It is likely to abolish the interpretational problems whether a particular transaction is goods or services; applicability of State or Central levy or applicability of a particular rate, as may arise. So, the GST will have a separate characteristic and its impact will be large and wide.

Unlike the tax laws on the sales or purchases of goods, the levy of tax will not be confined to the moveable properties only. It will extend to the immovable properties as well. For instance-

(i)The lease of premise is nothing but a lease of immovable goods. Actually, the dictionary meaning of the term ‘lease’ is ‘a contract by which one party lets land, property, services etc. to another for a specific time, in return for money. (ii)Levy of duty on premises, that is, on the immovable properties is presently a subject matter of the State revenue department;

Consequently, with the introduction of the GST, any such laws will naturally be irrelevant and will turn to be redundant. The salient features are discussed below:
(i)India is a federal structure of country. The State Governments and the Central Government, apart from other essential ingredients, have been empowered to undertake the economic administration within the frame work of the Constitution, subject to the conditions, restrictions and limitations imposed therein. The GST will have, therefore, mainly two components;
(a) one levied by the Centre; (b) the other levied by the States.
This dual GST model will be implemented through multiple statutes –
(a)CGST for Centre; and (b) SGST for every States.

The basic issues ,like; chargeability, definitions, taxable persons, measure of levy of tax including the voluntary provisions, basis of classification and other allied matters, will be governed by the uniform statutes, as far as practicable.
(ii) Both CGST and SGST would be applicable to all transactions of goods and services except the exempted goods and services, goods, which are to be kept outside the purview of GST. Similar will be the case in respect of the transaction, which is below the quantum limit.
(iii) The taxes paid against the CGST and the SGST are to be credited in two separate accounts. The input credit derived from the CGST is to be utilized for the Central, while likewise the SGST input derived, is to be utilized for the respective States.
(v)Cross utilization of the ITC (Input Tax Credit) between CGST and SGST is not generally permissible.
(vi) The feasible uniform procedure for collection of both CGST and SGST would be prescribed in the respective legislation for the Central and the States.
(vii)The power of administration of the CGST will rest with the Centre, while that of SGST administration with the States.
(viii)Tax return for the relevant period is to be submitted by the tax payers both to the CGST and SGST authorities.
(ix) The tax payers would be allotted a PAN Card, as a tax payer’s identification number. The GST Pan-linked system with a total 13/15 digits to be worked out in consultation with the Income Tax department, will mainly be linked with the Income tax PAN system, facilitating exchange of data and tax payer’s compliance.
(x)Assessment, enforcement, scrutiny and audit would be undertaken by the authorities, which will be engaged for collecting the tax with information sharing between the Centre and the States.

In addition to the above, the deals at the inter-State level will be termed as the Inter-State GST (IGST). The utilization of the inter-State supply of goods and services will be made under the IGST model. The ITC will be from the respective inter-State level.
‘Dual’ means - ‘two fold.’ India is a federal structured country. The Central and the State Governments have been provided with power to rule the country with the division of powers enunciated in the Constitution. In the economic scenario, particularly in relation to the levy and collection of tax, appropriate legislation is to be worked out by Parliament and the State Legislatures, as envisaged in clause (1) of Article 246 read with List I (Union List) and clause (3) of Article 246 read with List II (State List). In addition to the above clause (2) of Article 246 read with List- III (Concurrent List), the power can be exercised by the Union and the States concurrently. The Central and the State Governments are to be empowered to perform their distinctive duties in making enactments in the matter of raising revenue resources vis-a-vis guarding any possible leakage or drainage of revenue. A dual GST is a product of fiscal federalism, keeping in view, the Constitutional requirement.
The basic architecture for subsumation designed in the GST system and l the principle formulated thereof, are-
(i)Taxes or levies to be subsumed should primarily in the nature of indirect taxes, either on the supply of the goods or on the supply of services; (ii) Taxes on levies to be subsumed, should be part of the transaction chain, which commences with the import/manufacture/production of goods or provision of services at one end and the consumption of goods and services on the other; (iii)The subsumation should result in free flow of tax credit in intra-State and inter-State levels; (iv)The taxes levied and the fees, those are specially related to the supply of the goods and services, should not be subsumed under GST; (v)Revenue fairness for both Union and States individually would need to be attempted.
The basic principle of the GST being as such, the Empowered Committee recommended that the following Central Taxes, administered by the Government of India, ab-initio, are to be subsumed under the Goods and Services Tax net;
(a)Central Excise Duty; (b) Additional Excise Duty;(c) The Central Duty levied under the Medicinal and Toiletries; (d) Preparation Act;(e) Service Tax;Additional Customs Duty, commonly known as Countervailng Duty (CVD) (f) Special Additional Duty of Customs- 4% (SAD); (g)Surcharges; and (h)Cesses
Likewise, the following State taxes have been proposed to be incorporated in the GST net:
(a)VAT/Sales tax;(b) Entertainment tax (unless it is levied by the local bodies);(c) Luxury tax; (d)Taxes on lottery, betting and gambling (e) State Cesses and Surcharges in so far as they relate to supply of goods and services; and (f)Entry tax not in lieu of Octroi.
The movement of goods, occurring from one State to another, not by way of sale, but by way of stock transfer for the purpose of sale out side the State or for any manufacturing activities or for other purposes, is restricted from levy of any tax, as laid down in sub-clause (a) of clause (1) of Article 286 of the Constitution. Any levy of tax is, therefore, beyond the ambit and competence of the State Legislatures. The Central Act has exempted tax on the said stock transfer of goods subject to some conditions and restrictions with production of satisfactory evidences. The GST literature has not reflected properly as to the question taxability or otherwise of the goods to be moved from one State to another on stock transfer. However, time will say as to the modus operandi of this tax measure.
The following will be excluded in the GST tax net :
(a) Direct Taxes; (b) Property Taxes; (c) Stamp Duties; (d) Toll Tax; (e) Passenger Tax; (f)Road Tax; (g)Telecom(h) Licence Fee; and 9i)Tax on Electricity.
The Central Government constituted the State Empowered Committee to work out the ways and means, to examine and to prepare a road map on the proposed system of the GST, as done in the case of VAT. T is on the heels to carry out such a heavy responsibility. The Empowered Committee with the concurrence of the Central Government like wise constituted a Joint Working Committee Group with a view to study the models of the GST in the global sphere, if necessary, to provide alternative suggestions, keeping in view India’s fiscal position. The suggestions of the Joint Working Group will include as well the following :
(i)The GST is to be a revenue- fair with sufficient growth of revenue to the Centre and the States. Interest of Special Category, North East States and the Union Territories have to receive due consideration. (II)A study by the group will be necessary in which power of levy, collection and appropriation of revenue by the Centre and State should be categorically mentioned besides providing the manner with the pros and cons of the various identical models. (III)There should not be any double taxation. (IV)The problems faced in the matter of inter-State transactions and revenue loss should have a suitable end. (V)A suitable solution over the question of exempted, non-VAT items, petroleum products and alcohol might be well treated by exclusion from the GST regime. (VI)The trade, industry, agriculture and the consumers’ interest are well guarded and the Central-State relationship is maintained cordially.
. The present multifarious system of tax has practically crippled the economy of the country. A commodity has to suffer various incidence of tax right from the production to reach the consumers’ hands by this way or that. The tax levied in different aspect is approximately about 27.5%. In GST regime, such total incidence of tax is likely to be reduced and to come down within approximate perimeter of 20%. Obviously, a reduction of the quantum of tax levy is expected.

High rate of tax generally paves the way for mounting evasion of taxes. A trader develops the mentality to escape from heavy burden of tax and adopts various fraudulent means to evade taxes. This is long grown phenomenon of the traders if reduced considerably, the trend and tendency of evasion of tax, is likely to be minimised to a considerable extent. However, it can not be said categorically that such a modus- operandi will take a final good-bye. It can, however, be well expected that the revenue generation will be accelerated to a considerable extent.

Globalization of economy is now one of the min themes of the world nations. Any good tax policy aims at social and cultural up-liftment, global economic realities, administrative efficiency, technological development, economic growth, stability, equity, to ensure welfare of the economically weaker and the vulnerable sections of population. GST will cut the cascading effect and thus can benefit not only to the consumers but also to the industry at large.The intentions of the global nations are as well to make out an all round competition at the global levels and it is not necessarily on the regional or country basis. All are eager to adopt common tax system, uniforms and simple, as well a common marketing platform. There is a common thought that the lower rate of tax will yield higher revenue, as the tax dodging episode is likely to be reduced, when there is lesser burden of tax.

The GST law will be an amalgamation of the measure of tax by the State, the Centre and also at the inter-State level. The powers and functions will as well be divisible amongst the three. The respective provisions of law and the power exercise, it is believed, will maintain their own entity. A question naturally crops up whether Parliament will be vested with the power to make enactment of the GST law or the State Legislature will be responsible for enactment of the portion of law relating to the respective States. That is a policy matter and no comment at this stage seems necessary. However, apprehension is there that the States may lose their autonomy and will be forced to be dependent on the centre in all spheres.
The literature on the GST provided an idea that there will be a drastic change in the Central and State tax structure. Such change will only be possible, when bases are prepared in the Constitution. At present the power scenario of the Centre and States are divisible in the Seventh Schedule of the Constitution. If any unified law is enacted, the Constitutional set up will require amendment. An amendment of the Constitution will thus be imperative and the Seventh Schedule of the Constitution (Union List, State List and Concurrent List) will require renovation.

(Mrinal Kanti Chakrabartty)
“Rudra Bhawan”, Radha Govinda Barua Road, 10 Lakhimipth,Guwahati-781-024