CBEC Tax officers’ protests in Mumbai; Nationally

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CBSE Tax officers and employees from Mumbai Air Cargo section protesting during their lunch time

Part of about 70,000 Tax officers and employees of Central Board of Excise and Customs (CBEC) wore black bands at work on Monday in Mumbai. The protest was organised on some recent decisions taken by the GST Council headed by Finance Minister Arun Jaitley. The protest was symbolic where no public dealings were affected. It was a sort of Satyagrah without hampering any official duties any inconvenience to public whatsoever. The associations said they believe in Constitutional methods of protests only to make their voices heard and to draw the attention of decision makers. The Tax officers and employees of CBEC from Pune office also actively participated in the protest and came fully in support during their lunch time at Pune head office too.

Who participated in protest?
The members of Indian Revenue Services (Customs and Central Excise), All India Association of Central Excise Gazetted Executive Officers, All India Central Excise Inspectors’ Association and All India Central Excise and Service Tax Ministerial Officers Association participated in Monday’s symbolic protest.
Not only in Mumbai but the same has been successfully observed on Monday across the country with unprecedented unity and solidarity cutting across rank and files all over India spreading from Kashmir to Kanyakumari and Bhuj to Itanagar for the cause of the Nation, the interests of the taxpayer and dignity of CBEC.

What does association says
As per the press statement released by the associations representing them said the decisions are heavily tilted towards the states. The entire workforce of CBEC is committed towards the implementation of the biggest taxation reform in independent India. Our officers have worked tirelessly in conceptualising, drafting & fine tuning the contours of GST & have functioned as the bedrock of GST by training all centre & state officials for GST. We are committed to doing so in the future too.

Feelings of association
The CBEC association feels that it is their rightful duty and fundamental right to raise alarm over issues which may have a long term negative impact on the nation, their service and an effective GST. The decisions taken in the last GST Council meeting are unjust & inimical to the interests of the nation & our service. The association feels GST, if implemented in this way, will forever weaken the centre, also cause enormous havoc and confusion in the economy and adversely affect the “Ease of doing business”.

Well studied legal issues
In the present scheme, the states have been empowered to collect both the CGST, IGST & SGST for more than 82% of taxpayers, while centre will collect the taxes from only 18% taxpayers. This might lead to many issues. For example, in the event of auditing of the factory from where the CGST is being collected by the State, to which authority the CAG would table the report, The Parliamentary PAC or the State PAC?

There is also a huge difference between training, execution, expertise level and method of selection of the central and state authorities. This would lead to a situation where there is confusion amongst trade and diverse interpretation of the same laws by state & central officials.

After amendment of the Constitution of India, article 269A has been inserted in the Constitution which gives exclusive powers to the Central Government to levy and collect GST on inter-state supplies and a portion of this GST collected by the Central Government has to be apportioned to the recipient state for the goods or services received in that State. GST Council has decided that this Constitutional mandate of the Central government will be delegated to the Officers of the State Governments. The question is – which State Government’s Officers will collect this GST on inter-State supplies – the originating State Government?

If that is the case, then can one State’s Officers lawfully assess the tax which constitutionally belongs to another State? Will the recipient State’s interests be secured by the Officers of the originating State?

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CBSE Tax officers and employees from Pune protesting during their lunch time

Secondly, for GST collection, the area within 12 nautical miles has been entrusted to the State Governments. Can Officers of the States lawfully collect any tax in respect of an area which is not part of their State’s boundary?

The Proposal can weaken the Union Government
India is a Union of states where the constitution has provided for a balanced scheme of fiscal federalism, under which both the center and states are provided their specific role. The center has been provided with wider fiscal authority under the constitutional scheme in order to undertake its responsibilities of defense, development of the nation and providing transport & communication facilities. The Center is also expected to play a balancing role among the states and ensure fiscal responsibility on part of the states. For carrying out these functions effectively the Central government requires robust finances and an effective tax administration. It would be fallacious to presume that the tax administration has little role to play in tax collection, and thus it would be irrelevant which agency collects the tax. Divesting the Union Government of this important role and function, even by a Constitutional amendment or a statute/procedural arrangement will be against the basic structure of the Constitution. A strong centre is needed to keep India together & forge our national growth forward. This single proposal can weaken the Union Government forever.

The proposal can ruin the functioning of an efficient GST
The decision to keep 90% taxpayers below Rs 1.5 crore turnover will lead to rampant tax evasion, confusion & chaos amongst assesses due to different interpretations of issues by different states from J&K to Kerala.

The impact
It shall lead to mushrooming of a large number of illegal proprietorship concerns by the tax-payers in order to remain below the threshold turnover or Under-Report their turnover, thereby incentivizing the dis-honest tax-payer.
It happened in European Union too

In EU, when GST was being implemented from 2006-11, there was massive evasion of duties known as the “Carousel Fraud” (or the “Missing trader” fraud) where there was a GST evasion of 200 million euros. This fraud was possible as the different member states of EU could not cross check data which was being submitted to other states.

Report: Sitaram Mewati