NOVEMBER 01, 2016

By R C Saxena, Advocate

AS a lawyer I have a different take on the GST and I write this with disdain and despair. I have strong reservations for the "unifying, trend setting and path breaking" tax reform, in the form of GST, which the Government of India wants to usher at a break neck speed in the game of political one-upmanship. When enacted, it will in one stroke render some of the superbly written, well chiselled and time tested anglo-Indian legislations wholly meaningless and virtually inapplicable. Laws like the Sale of Goods Act, Contracts Act and Central Excise Act will go out of the window once the GST comes. Of what use will these legislations be when the new tax will be collected on "supply" and not on sale or manufacture or conveyance?

Under the GST, any transfer of title in goods is supply of goods. How can there be any transfer of title in goods otherwise than by way of sale under the Sale of Goods Act? How would GST, a tax law, deal with an agreement or contract of sale wherein the rights and obligations of the parties are so well defined under Sale of Goods Act and wherein "consideration" is the soul of such agreements/contracts. I am told that under GST, under some circumstances, there need not be any "consideration" between the provider of supply and the receiver thereof.

There will be, technically and legally speaking, no passing of property in goods or the transfer of title in goods since the invoice for sale will not be there. The GST invoice will refer to the provider of supply and the receiver of supply. The element of sale will diminish in each transaction in the 'convoluted' chain of input GST credit. The sanctity of sale and purchase will be replaced by the compulsions of providing supply in terms of the GST rules and the relationship between a buyer and seller will be determined not by mercantile laws but by who passes or receives the input stage GST credit most expeditiously.

Just when the dust was beginning to settle on complex and contentious issues like manufacture, valuation, works contract, refunds of duties and taxes and a host of issues, thanks to the erudition and scholarship of the Supreme Court's and High Court's justices, that a new tax is proposed to be introduced post-haste. All at once, on coming into force of GST, the concept of manufacture which the Hon'ble Supreme Court in its wisdom had so painstakingly laid down, over the years, will cease to exist. With fewer rates of tax the challenge of resolving classification disputes in relation to manufactured goods will go away. The profound legal maxims like ejusdem generis, nosciur asociis, contemporaneous expositio, sub-silentio and others will be lost in the maze of the algorithms of the information technology which will drive the GST.

The enormity (which literally means monstrosity) of the GST lies in the disruption of the federal structure of this country in the name of unifying tax reform. The compensation promised to the states will be subject to the whims and prevailing circumstances of the political party in power at the centre. In any case, the government of India does not exactly have a good track record insofar as keeping of promises is concerned. Was it necessary to emulate a handful of countries which have tax similar to the proposed GST while knowing that the political system and the basic constitutional structure of India is so uniquely different from those countries? I am sure it cannot also be a WTO mandate to introduce such a tax. If it were so, why have many other progressive members of WTO not ventured to do so?

It is said that thousands of crores of Rupees will be spent in creation of the information technology infrastructure to effectively levy and collect the GST across the country. The same amount of money would be better spent on IT infrastructure for rural health, sanitation, urban civic facilities and education.

Lastly, my sympathies rest with the tax bureaucracy at the Centre and State levels which will have to face the travails of trial and error while enforcing the new GST.

(The views expressed are strictly personal.)