New Delhi, Aug 8 (KNN) Evaluating various provisions of Model GST Bill, traders’ body Confederation of All India Traders (CAIT) has said that if the standard tax rate​ remain​ nearby 18% under GST, it will prove to be an ideal tax rate and in all probability will not stoke significant inflation as assumed by many.

However, it said that the finalisation of tax rate depends much upon classification of goods & services under exempted category and also under nominal tax rate which may be 1%.

CAIT President B.C.Bhartia & Secretary General Praveen Khandelwal in a joint statement said that under current VAT regime items placed under 5% tax slab will be attracting standard rate of tax which may be 18% and it is feared that such a situation will lead to inflation.

However, they said that it is noteworthy that goods placed under 5% are largely used as raw material for finished goods and were attracting Excise & Service Tax so far with no advantage of input credit for MSME whereas under GST though they would be placed under higher slab but will be eligible for input tax credit for not only the goods but even for the services.

Explaining the issue, they said that on the other hand, currently the items under VAT slab of 12.5% with various cess etc. will also be placed under standard tax rate may be 18% shall eventually be remain cheaper since the component of excise duty, services tax and other taxes will no more be levied and full input tax credit will be available to seller for paying tax @ 18%. However, in spite of all these mathematics, in initial days there might be some inflation which will be subside once the taxation system is duly adopted in its letter and spirit.

​Stressing​ the need for unification of taxes levied on goods and services, both leaders said that for doing any business of trading in goods support of service sector is required since they both complement each other. Distribution of goods attracts VAT while providing services levy service tax. Currently, there is no provision of obtaining input credit on taxes paid on both since they are administered by different Governments under different laws.Now, under GST regime, input tax credit for both will be available and cascading effect and double taxation which is prevalent at present will go and subsequently will result into reduction of cost of goods.

Both Bhartia & Khandelwal said that major challenges will come from implementation and compliance side since GST tax structure is entirely based on e compliance mechanism.. It is to be noted that corporate sector alone is not the tax payer which is equipped with necessary computerised infrastructure. About six crore small businesses are the real tax collectors and as per an estimate only 25% to 30% of this sector is computer enabled.

“The rest of 70% is yet to adopt technology and the Government must draw a time bound mechanism to equip them with computers and imparting necessary training for computer operations and this can be done through Digital India and Skill India program of the Government but with involvement and cooperation of Trade Federations and Associations. Through MUDRA, loans can be awarded at a reasonable lo​w​ rate of interest to small businesses for purchasing Computers and its operation & maintenance.”, said CAIT. (KNN Bureau)