Corporate India will have to brace up for withdrawals of tax exemptions not only on the direct taxes front but also on indirect taxes.
For the Goods and Services Tax (GST) regime, the Finance Ministry is now looking to prune the Central list of exemptions and bring it to the level of States, Rashmi Verma, Special Secretary, Finance Ministry, said at conference organised by the PHD Chamber of Commerce and Industry here on Thursday.
Currently, the number of exemptions at the Central level stands at 292 (excise duty exemptions) while at the State level it is 90 (VAT related).
The objective of this exercise is to have minimum level of exemptions so that cascading effect is minimised and seamless transfer of input tax credit as desired by industry is possible, she said.
“To maintain the purity of GST, we will not be favouring many exemptions,”Rashmi said.
“If the objective is to minimise the cascading of taxes under GST, then we have to prune the current exemption list and do away with the regime of exemptions to the maximum extent possible.”
She also said that the Finance Ministry was not in favour of continuing with exemptions even for special category States. However, if some States want to give special benefit to industry, then the Finance Ministry may not be averse to it.
The senior Finance Ministry official expressed confidence that GST would soon be a reality in India.
Scope for misuse Meanwhile, the Central Board of Excise and Customs (CBEC) Chairman Najib Shah said in his address at the event that exemptions would be a “death knell for GST”.
“The new GST framework predicates on the fact that you (industry) are not going to keep asking for exemptions. Every exemption creates an arbitrage for misuse. Exemptions cause distortion. Exemptions do not help in seamless flow of input tax credit,” Shah said.