Recently, the Indian Revenue Service Association wrote a letter to the prime minister, outlining some of their concerns on GST implementation.
One of the things they pointed out was that administrative structure in the state government remains “highly control oriented with emphasis on seizure or attachment of goods and nakas on tolls”.
Such an approach, they argued, may not be prudent for India’s growth in the services sector that has always faced a very open and pro-trade tax administration.
Amongst others, the inference here is that state government officials will need to reinvent themselves, as there would hardly be any physical interface between tax authorities and taxpayers. The letter further elaborates on various human-resources (HR) issues that need to be taken into account for a successful GST implementation. We often miss the HR-side of the issues around GST, with discussions centred on the transformational impact of GST on economy, demand, pricing, supply-chain and so on. There is indeed a human side—involving government officials (both Centre and states), companies as well as their tax advisors and lawyers—of the GST impact to consider as well.
Perhaps, the change would be the starkest for the government officials. First and foremost, due to division of administrative powers between Centre and state, 50% of businesses with an annual turnover of `1.5 crore or more, would be controlled by only one set of authorities (Centre or State). Today, a company having three factories in one state might fall under the jurisdiction of three different set of excise officers. Under GST, that particular company may be administered by state authorities, and the excise officers may not have any control over it at all. This will need a mindset of ‘giving up’ which the tax authorities are generally not known for. Also, there will not be any factory-based excise duty under GST and, along with that, concepts such as manufacture, MRP of products (for computation of excise duty for most consumer items), clearance of goods from factory (as excise duty has to be paid upon clearance), approval for sending/receiving the goods for processing/repair, etc, will no longer be relevant. Instead, the officials will have to learn newer concepts such as ‘supply’ of goods, which has hitherto been alien to the authorities.