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PROJECT REPORT
June 2010
Letter of Transmittal
June 12, 2010
Shri P. R. Devi Prasad,
Director,
Fiscal Policy Institute,
Finance Department,
Government of Karnataka,
Bangalore.
Dear Sir,
I am pleased to submit the report, Migration to GST: Preparedness and level of Knowledge,
Understanding, Application and Skills of Human Resources in the Government and the
Industry in partial fulfillment of the requirements for the degree of Post Graduate Diploma
in Management. I hereby declare that this is an original work done by me and the findings of
this work have not been previously submitted for any publication.
Please feel free to revert to me with any questions and/or comments regarding this report.
Sincerely
(Shiva Raman S)
Summer Intern
Indian Institute of Management
Certificate
This is to certify that the project titled Migration to GST: Preparedness and level of
Knowledge, Understanding, Application and Skills of Human Resources in the
Government and the Industry submitted by Shri Shiva Raman S as a part of summer
internship is the result of the work done by him at Fiscal Policy Institute Bangalore, Finance
Department, Government of Karnataka, from April to June 2010 under our guidance.
Place: Bangalore
Place: Bangalore
Date:
Date:
Director
Special Officer
Finance Department
Finance Department
Government of Karnataka
Government of Karnataka
ii
Acknowledgements
I am deeply indebted to Shri P.R. Devi Prasad, Director, Fiscal Policy Institute, Bangalore,
under whose guidance the present study was conducted. He has been giving valuable
suggestions, generous help and corrections during all the phases of the project, without which
the efforts could not have been completed successfully.
I would like to extend my indebtedness and gratitude to Smt. Anita V. Nazare, Special
Officer, FPI, for the invaluable guidance and feedback provided by her at every stage of the
project. She could always find time from her busy schedule to help in this study.
I am indebted to Shri Sameer Hassan MBA, Kum. Munawwara Shakila MBA, and Kum.
Veena N. H MBA, all Consultants at FPI, for their guidance and support from time to time.
I am indebted to Shri J Crasta, President, FKCCI, Shri B T Manohar, Chairman, State Taxes
Committee 2009-10, FKCCI, Shri Subramanyam, Head of Business Research Cell, FKCCI,
and Kum. Lillu Aswataiah, Deputy Secretary, FKCCI for their guidance and invaluable help
in getting responses from Trade and Industry.
I am indebted to the following officials for their guidance and invaluable help in getting
responses.
1. Shri Ajay Seth IAS, Secretary (B&R), FD, GoK
2. Shri Balamurugan K IRS, Additional Commissioner, Large Taxpayers Unit,
Bangalore
3. Shri H D Arun Kumar, J.C.C.T, GoK
4. Shri Pradeep Singh Kharola IAS, C.C.T, GoK
5. Shri Sriram IRS, Additional Director, National Academy of Central Excise and
Narcotics, Bangalore
6. Shri Vipual Bansal IAS, Deputy Secretary (B&R), Finance Department, GoK
I am deeply thankful to my fellow interns, Shri Samar Sinh and Shri Laxmikant Jhawar for
their enormous support, guidance and help at every juncture through exchange of ideas and
views on the study.
I am thankful to Officers and Staff at FPI and FPAC who have shown tremendous
cooperation and support throughout the course of study.
iii
I would also like to thank Shri B K Bhattacharya ex-IAS, Chairman, Expenditure Reforms
Commission, Government of Karnataka for his support and encouragement.
I would also like to thank Government of Karnataka for giving me an opportunity to work on
this project at FPI.
I would also like to thank all the respondents for giving their time and invaluable responses
for this study.
I would like to thank Dr. D. Tripati Rao, Professor, IIM Lucknow, for his support and
encouragement.
Shiva Raman S
Summer Intern
Indian Institute of Management
iv
Table of Contents
Letter of Transmittal ................................................................................................................................ i
Certificate................................................................................................................................................ ii
Acknowledgements ................................................................................................................................ iii
Table of Contents .................................................................................................................................... v
List of Figures ....................................................................................................................................... vii
List of Tables ....................................................................................................................................... viii
Abbreviations ......................................................................................................................................... ix
1
Introduction ..................................................................................................................................... 1
1.1 Objectives of GST ...................................................................................................................... 1
1.2 Recent progress in implementation of GST ............................................................................... 2
1.2.1
IT Infrastructure .............................................................................................................. 3
Methodology ................................................................................................................................. 14
3.1 Research Design ....................................................................................................................... 14
3.1.1
3.1.2
Descriptive Research..................................................................................................... 14
Interview ....................................................................................................................... 15
3.2.2
Questionnaire ................................................................................................................ 15
.......................................................................................................................... 21
v
4.1.1
4.1.2
4.1.3
4.1.4
4.1.5
Professionals ................................................................................................................. 45
4.1.6
4.2 PART II
53
4.2.1
Hypothesis 1.................................................................................................................. 53
4.2.2
Hypothesis 2.................................................................................................................. 54
Bibliography ................................................................................................................................. 61
Appendix ....................................................................................................................................... 62
7.1 Appendix 1: Interview questions for top officials .................................................................... 62
7.2 Appendix 2: Questionnaire for middle level tax officials ........................................................ 64
7.3 Appendix 3: Questionnaire for tax department staff ................................................................ 69
7.4 Appendix 4: Questionnaire for Trade and Industry ................................................................. 71
7.5 Appendix 5: Questionnaire for professionals ........................................................................... 75
7.6 Appendix 6: Questionnaire for general public ......................................................................... 79
7.7 Appendix 7: Timeline for implementation of GST, suggested by Thirteenth Finance
Commission Task Force for introduction of GST on October 1, 2010. ............ 81
7.8 Appendix 8: Responsibility and Accountability of various activities relating to
implementation of GST, suggested by Thirteenth Finance Commission Task
Force. ................................................................................................................ 82
7.9 Appendix 9: Details of tax revenue realised during the period from 2004-05 to 2008-09....... 83
7.10 Appendix 10: Percentage of dealers taken up for tax audit...................................................... 84
7.11 Appendix 11: Data gathered from general public on awareness and understanding of VAT and
GST ................................................................................................................... 85
7.12 Appendix 12: Some Useful Links ............................................................................................ 86
vi
List of Figures
Figure 1: Main source of understanding GST for middle level tax officials ........................................ 33
Figure 2: Percentage of respondents from Central Excise and Customs who have received/ not
received training on GST....................................................................................................... 36
Figure 3: Main source of understanding GST for Tax Department Staff of Central Excise and Customs
.............................................................................................................................................................. 37
Figure 4: Main source of understanding GST for Inspectors and Superintendents of the Commercial
Taxes Department .................................................................................................................. 39
Figure 5: Percentage of respondents from trade and industry who have attended seminars or
workshops on GST ................................................................................................................ 42
Figure 6: Main source of understanding GST for trade and industry ................................................... 43
Figure 7: Percentage of respondents from the professionals group who have attended
seminars/workshops on GST ................................................................................................. 47
Figure 8: Main source of understanding GST for respondents from the professionals group .............. 48
Figure 9: Percentage of respondents from general public who claim to be aware of GST ................... 50
Figure 10: Percentage of respondents from general public who claim to be aware of VAT ................ 51
Figure 11: Percentage of respondents from general public who claim to be aware of the proposed date
for implementation of GST ................................................................................................. 51
Figure 12: Percentage of respondents from general public who claim to understand the concept of
GST ..................................................................................................................................... 52
Figure 13: Percentage of respondents from general public who claim to understand the concept of
VAT .................................................................................................................................... 52
vii
List of Tables
Table 1: Level of agreement to statements for which positive response/agreement was expected from
middle level tax officials ....................................................................................................... 31
Table 2: Level of agreement to statements for which negative response/disagreement was expected
from middle level tax officials............................................................................................... 32
Table 3: Level of agreement to statements for which positive response/agreement was expected from
Central Excise and Customs Department staff ...................................................................... 35
Table 4: Level of agreement to statements for which negative response/disagreement was expected
from Central Excise and Customs Department staff ............................................................. 36
Table 5: Level of agreement to statements for which positive response/agreement was expected from
CTD staff ............................................................................................................................... 38
Table 6: Level of agreement to statements for which negative response/disagreement was expected
from CTD staff ...................................................................................................................... 38
Table 7: Level of agreement to statements for which positive response/agreement was expected from
Trade and Industry................................................................................................................. 40
Table 8: Level of agreement to statements for which negative response/disagreement was expected
from Trade and Industry ........................................................................................................ 41
Table 9: Level of agreement to statements for which positive response/agreement was expected from
Professionals .......................................................................................................................... 45
Table 10: Level of agreement to statements for which negative response/disagreement was expected
from Professionals .............................................................................................................. 46
Table 11: Level of agreement to statements for which positive response/agreement was expected from
general public ...................................................................................................................... 50
Table 12: T-Test results for Hypothesis 1 ............................................................................................. 53
Table 13: T-Test results for Hypothesis 2 ............................................................................................. 54
Table 14: Data gathered from general public on awareness and understanding of VAT and GST ...... 85
viii
Abbreviations
ACCT
Addl. CCT
ATO
BAS
CBDT
CBEC
CBIT
CCT
CENVAT
CGST
CRA
CST
CTD
CTO
DCCT
EC
GoI
GoK
GST
GSTSAO
HST
IGST
ITD
JCCT
KUAS
LTU
MODVAT
PAYG
PST
QST
RQ
SGST
TINXSYS
TRPS
VAT
ix
1 Introduction
In the Union budget 2007-08, the then finance minister proposed that India should move
towards a national level GST, with the Centre and the States sharing revenue. He had further
proposed to set April 1, 2010 as the date for introducing GST1. There was much
disappointment for everyone who expected Budget 2010 to lay out the plan for goods and
services tax (GST) rollout. GST was postponed to April 1, 2010. The earlier deadline of April
1, 2010 was missed because of disagreement between the Centre and the states on many areas
of GST. Some of the areas of differences include threshold limit, exemption list, revenueneutral rate and constitutional amendments. In his budget speech (2010), the Union Finance
Minister said that the indirect tax administrations at the Centre and the States needed to
revamp their internal work processes based on the use of Information Technology.
The existing VAT system was implemented by the States beginning April 1, 2003 replacing
the State Sales Tax system. The VAT system removed the problem on tax on tax and the
burden of cascading effect. Since set-offs benefits can be availed only if tax is paid on the
inputs and previous purchase, this created a built-in check in the VAT system which resulted
in transparency and reduction in tax evasion. VAT reduced the heterogeneity in the tax
structure across States which other-wise resulted in distortion and shifting of trade from one
State to another.
Still the VAT structure at the Centre and the State had deficiencies2. The CENVAT does not
include several central taxes such as surcharges, additional excise duty, etc. It also does not
capture the value-additions in the distributive trade below the manufacturing level. The State
level VAT does not include several taxes such as luxury tax, entertainment tax, etc. Further
the load on CENVAT is included in the value of goods to be taxed under State VAT.
objective, GST can increase revenue for both Centre and State through widening of tax base
and increase in tax compliance. Both the industry and the government can benefit from GST.
The objectives of GST3 are given below:
Objectives given in 13th Finance Commission Task Force Report (section 2.1)
The CST, imposed on inter-state movement of goods, was reduced from 4 percent to 3 percent in 2007-08 and
later to 2 percent in 2008-09.
committee said, April 1, 2011 is our target and we will make all efforts to meet it. We are
confident. Mr. Dasgupta also said that the draft of the proposed constitutional amendments
required for GST implementation would be sent to state finance ministers over the fortnight
by the law ministry. However, no such amendments are available in public domain.
The empowered committee, in its first discussion paper on GST, had suggested that
businesses below a gross annual turnover of Rs 1.5 crore will be subjected to GST only by
the state and not by the Centre. The Centre, however, is strongly opposed to the idea as it
would result in a substantial revenue loss, and said there should be a common threshold of Rs
10 lakh. The Centre has also said that it wants a common exemption list for both the Centre
and the State, and an acceptable level of GST rate, against the States demand of 18-20
percent.
The activities and their duration mentioned in the timeline5 for implementation of GST
suggested in 13th Finance Commission Task Force report show that still lot more is required
to be done before introduction of GST. With less than ten months left to meet the revised
target date of April 1, 2011 one will have to wait and see if the country can prepare enough to
migrate to GST within the time available.
1.2.1
IT Infrastructure
IT infrastructure for GST rollout is being looked into by a Committee, comprising the Unique
Identification Authority Chairman Mr. Nandan Nilekani. On June 1, 2010, Mr. Nilekani after
his interaction with officials of the CBEC has said that the Central and the State governments
could not work in isolation on IT infrastructure for GST and that the system must be
taxpayer-friendly to increase compliance6. He said there should be a platform where the
states IT team and the Centres IT team interact with each other and meet on a regular basis
to share their views.
IT infrastructure will play a major role in implementation of GST. The dependable IT
systems have to be developed simultaneously and uniformly in all the states, unlike in the
case of IT structure for value-added tax. The Centre has a broad IT infrastructure in place, but
it is a major issue with states which have varying capacity. The Centres online tax payment
The timeline (suggested introduction date: 1st October 2010) suggested by the empowered committee along
with activities relating to implementation of GST is available in Appendix. Accountability and responsibility of
activites to be carried by the Centre, the State and the Empowered Committee are also given.
6
Source of news: http://www.business-standard.com/india/storypage.php?autono=396671
application ACES7 (Automation of Central Excise and Service Tax) will be suitably upgraded to
take care of the GST but computerization of states is the biggest concern. Maharashtra,
Gujarat and Tamil Nadu are even ahead of the Centre, but a large number of states do not
have the infrastructure.
Training of staff of the tax departments of both the Centre and the States
o Awareness about the Acts, Rules and provisions
o Awareness of administration of service tax in states
Promoting awareness and understanding of GST among the public and professionals
o Collaborating with various professionals like accountants, tax consultants, etc
o Change in business processes, pricing by companies
o Integration with other future projects like the Unique Identification Number
o Educating the residents and citizens about the benefits of the new system
E-governance portal of CBEC for Central Excise & Service Tax Assesees: http://www.aces.gov.in/. Details
about ACES can be seen at http://www.centralexciseaurangabad.gov.in/htmldocs/ACES.pdf
All stakeholders which would include Central government, State governments, tax
administration, trade and industry, professionals who act as facilitators and consumers who
are tax payers have to be well prepared. Understanding the concerns of the stakeholders will
help in better implementation of GST. A hasty implementation of GST without adequate and
timely preparation will hamper the progress of the tax structure and could lead to confusion
among tax department staff and taxpayers, which would have adverse impact on revenue
collection.
To quickly asses the current preparation level of the government and the industry for
rollout of GST on following aspects
o Infrastructure for tax administration
o Knowledge, Understanding, Application and Skills (KUAS) of man power in
the Government and the Industry required for implementation of GST
To propose some measures to be taken to enable a smooth transition from the current
tax system to the GST system
To Compare the proposed GST system in India with international best practises
Successful tax reform: the experience of value added tax in the United Kingdom and goods and services tax in
New Zealand by James, Simon and Alley, Clinton of University of Exeter Business School, July 2008
1.6 Definitions
Knowledge
Knowledge is information about a subject which has been obtained by experience or study,
and which is either in a person's mind or possessed by people generally9. In this report,
Knowledge refers to information about GST. Questions pertaining to what of GST were
classified as knowledge related questions.
Understanding
Understanding is to know why or how something happens or works. In this report, refers to
the implications and purpose of GST. Questions pertaining to why GST were classified as
Understanding related questions.
Application
Application is to make use of something or use it for a practical purpose. In this report,
Application refers to the activities related to implementation and operationalization of GST.
Questions pertaining to how and when to implement GST were classified as Application
related questions.
Skill
A skill is an ability to do an activity or job well, especially because you have practiced it. In
this report, Skills refers to the practice or training required for knowing, understanding and
applying GST. Questions pertaining to training needs were classified as Skill related
questions.
General definitions of Knowledge, Understanding, Application and Skills have been taken from the Cambridge
Dictionary
The Quebec Sales Tax (QST), a tax imposed on essentially the same base as Canadas
federal VAT (GST) but administered by the provincial government, and
The Harmonized Sales Tax (HST), essentially a provincial VAT imposed on the same
base as the federal GST and administered by the federal government
In some provinces, Provincial Sales Tax or Retail Sales Tax continues to exist.
The existence of these two different forms of provincial VAT has not resulted in technical or
economic problems for the federal VAT. On the other hand, the existence of a federal VAT
has apparently spared Canada from many of the VAT evasion problems, to which so much
attention is paid in the European Union (EU). In EU, there is no Union-wide VAT.
Quebec has its own VAT (QST) on a base that consists of both goods and services and that is
largely harmonized with the federal GST. Both taxes are administered by the revenue
authorities of Quebec. Quebec was compensated by the federal government for the costs it
incurred in implementation of GST. Audit of tax returns is undertaken in close collaboration
between the two governments.
10
Under the HST model, the provincial VATs are completely harmonized with the federal
VAT. The two taxes are levied at a single composite rate, and administered by the federal
government. Revenue from the tax are redistributed to the participating governments on the
basis of the tax base.
The Canadian experience has demonstrated that a federal VAT can work perfectly well in a
country in which some sub-national units have their own VATs, some have their own retail
sales taxes (RSTs), and some have no sales tax at all.
When GST was introduced, the high visibility of the GST meant that most Canadians thought
of it as a "new" tax. The previous federal sales tax was invisible. The GST law allowed
registered firms to quote either tax exclusive or tax inclusive prices. However, in virtually
every case retailers treated the new GST exactly like the existing RST by adding it onto the
price at the cash register. Now, however, Canadians got the bad news every time they had to
dig into their pockets to pay the highly visible GST. Moreover, they had to pay the GST not
only on goods but also on many services that were exempt from provincial RSTs. Politically,
it was clear that something had to be done to avoid the appearance of increasing taxes on the
poor. This led to many special treatments to different sectors and activities.
The unreasonable delay in passing the legislation and the major last-minute changes made in
some key elements of the tax, before the legislation was passed made it impossible to
implement the educational campaign as planned and intended. While some of the initial
difficulties encountered were overcome with time, almost a decade after the introduction of
the GST the Auditor-General of Canada was still pointing out serious flaws in GST
administration, particularly with respect to audit.
A major risk analysis program with respect to GST was launched in 2000 (though not fully
implemented nationally until 2004) was focused, in part, on the possibility of fraudulent
refund claims. For the three fiscal years ending in 2003, about 1,300 GST returns with
fraudulent refund claims (totalling C$9 million) were detected. The estimated noncompliance rate fell from over 9 percent in 1998-99 to less than 4 percent in 2003-04.
The dual GST (CGST-SGST) model proposed in India is similar to the GST-QST model
implemented the province of Quebec. The next section looks into the GST-QST model in
some detail.
2.1.1
The QST is a destination-based credit-invoice VAT that subjects most goods and services
consumed in Qubec to tax at a statutory rate. But QST is not free of cascading effect. It is
applied on the federal GST inclusive prices of goods and services. Both GST and QST are
collected at the point of sale, and their amounts are shown separately on the invoice. The
QST base is not completely harmonized with the GST base.
Revenue Qubec (RQ) administers the GST on behalf of the federal government on Qubecs
territory, in addition to the QST. Under the terms of the agreement, RQ receives and
processes applications for registration under the GST/HST system from all persons carrying
on commercial activities in Qubec. (Businesses registered for the GST are automatically
registered for the HST, and GST registration covers the activities of any business in all 10
provinces.) After registration, all taxable persons continue to deal with RQ for all GST/HSTrelated matters including returns, remittances, rebate applications, audits, and investigations,
interpretations of laws and regulations, notices of objection, tax collection, and unfilled
returns.
The quality of RQ as a tax administration and its detailed knowledge of its taxpayer
population, when added to the economies of scale from collecting two taxes together rather
than separately, made the package an attractive one. With good information exchange,
combining the QST to the GST may well have helped both governments protect their
revenues. The CRA pays RQ a fee for collecting, administering and remitting the GST to the
federal government.
In addition to exchanging tax information with the CRA for the purposes of administering
both taxes in Qubec, RQ maintains an up-to-date, bilingual, and generally user friendly
Internet site to assist with administration, enforcement, and taxpayer education. Many guides
and forms are easily accessible from the site. Forms contain information that allows RQ to
track information and tax across the GST/HST-QST system.
One unusual feature found on the site is a list of QST cheaters, with name, trade name,
address, type of business, and fraud amount revealed for all to see. Businesses in the
restaurant, construction and home renovation, and services sectors consistently get top
billing. While one may question the appropriateness of this practice from a privacy
9
10
2.2.1
On 13 August 1999, the GST Start-Up Assistance Office (GSTSAO)12 was established within
the Department of Treasury to administer the $500 million assistance set aside by the
Government to assist Small and Medium Enterprises, the Community sector and Education
(SMECEs) institutions get ready for the GST. The GSTSAO administered these funds in
consultation with The New Tax System Advisory Board, the Business Advisory Panel and
the Community Sector Advisory Panel.
The GST Start-Up Assistance Office delivered programs until 28 February 2001, and closed
on 30 June 2001, one year after implementation of GST.
The assistance funds were used to deliver four programs described below:
1. Organisation Delivered Assistance (ODA) Programme: The objective of the ODA
programme was to deliver GST business skills seminars and material to small and
medium enterprises, the community sector and educational institutions (SMECEs)
through the peak body representing each industry sector. Peak bodies were invited to
submit proposals for funding that described how they would deliver the assistance and
the proposed cost. Contracts were negotiated with peak bodies after an assessment of
the proposals against benchmarks. The GSTSAO arranged contracts with some peak
bodies that were required to coordinate delivery to a number of related peak bodies
under a consortium arrangement. This ensured good coverage and value for money.
2. Advisor Education Programme13: The objective of the programme was to provide
GST education to a large network of geographically accessible informal advisors who
in turn could pass the information to the end target group. Courses were held in over
70 locations Australia-wide on the following topics:
12
http://www.gststartup.gov.au/
Course material can be found at
http://www.gststartup.gov.au/index.asp?file=educational/aep/AEO_EDUdown.html
13
11
3. Business Skills Education Programme: The GST Assist Helpline was launched on
11 October 1999 to provide a complete GST business skills information service
targeting SMECEs. The service was operated under contracts with The Institute of
Chartered Accountants (ICAA) and the Society of Certified Practising Accountants of
Australia (SCPAA) who provided answers to callers from small business, and the
community and education sector respectively. GST Assist operated until 28 February
2001. During the lifespan of the helpline, information was provided to more than 1
million callers.
Publications
The Office arranged for the production and distribution of around 20 million
publications on business skills, the GST, BAS and PAYG (including booklets, videos
and CD ROMs). In addition, electronic versions of the products were available on
GST start-up website: www.gststartup.gov.au.
Websites
Two websites provided information about the GST assistance programmes:
Over 14,000 suppliers were registered to supply goods and services under this
programme.
13
3 Methodology
In this chapter, the methodology adopted for this study is outlined. The research design, tools
of the study, sample of the study, statistical techniques and limitations of the study are
discussed.
Exploratory Research
Exploratory research has the goal of formulating problems more precisely, clarifying
concepts, gathering explanations, gaining insight, eliminating impractical ideas, and forming
hypotheses. It provides insights into and comprehension of an issue or situation14.The initial
phase of the project demanded an exploratory research to capture the knowledge,
understanding, application and skills relating to migration to GST. The problems and risks in
implementation of GST, and suggestions to mitigate the same were also gathered.
3.1.2
Descriptive Research
Descriptive research defines questions and finds answers to these questions using statistical
techniques on the data gathered. The following null hypotheses have been tested using the
collected data.
Tax department staffs with an experience of more than 20 years do not differ
significantly from staffs with an experience of 20 years or less in their agreement to
use of information technology for greater transparency in administration of GST.
Trade and Industry agree to the dual structure of GST, i.e. separate GSTs of the
Centre and the State.
14
Interview
Interviews were designed after studying secondary information and in consultation with
experts. The following information was gathered:
Training needs
Modes of Training
Co-ordination and information sharing between the Centre and the States
3.2.2
Questionnaire
Questionnaires were designed separately for different groups of target audience. To begin
with an exhaustive list of questions were prepared. Then these questions were segregated
under five different questionnaires. The segregation of questions was based on the group of
target audience that would be appropriate to answer a particular question. After consultation
with experts, the questionnaires were refined.
The questionnaire consisted of both open ended and closed ended questions. Open ended
questions were used to gather data on training needs, problems foreseen during transition and
suggestion to mitigate the same. Closed ended questions were used to gather data on sources
for understanding GST and to know whether the respondents have attended any training
programs in GST. The questionnaires also had an opinionnaire section that was used to
capture the degree of agreement on the following aspects.
15
Objectives of GST
An opinionnaire is devised with a view to probe into the minds of the respondents15. It
generally employs the techniques by which the degree of the agreement to a matter can be
traced.
3.2.2.1 Scaling Techniques
The Likert scale was used to measure the degree of agreement to statements in the
opinionnaire. The scale values are given below:
Option
Value
Strongly Disagree
Disagree
Disagree
-1
Strongly agree
-2
The details of the sample of the study are given below. The target audience selected for this
study are the stakeholders of implementation of GST. Basically, two groups were formed,
namely the Government and the non-Government. The respondent in the Government were
further categorised into top officials, middle level tax officials and tax department staff. The
15
Opinionnaires are used to measure the attitude and the belief of the respondents. It is also a type of
information form, also known as attitude scale. Researchers analyze the responses and reach to a conclusion
about the beliefs or attitude pattern of the respondents. The expressed reactions to a statement show their
attitude towards the matter in the question. Source:
http://www.researchcompanion.com/designing_opinionnaires.html
16
The types of sampling techniques and their advantages can be seen at
http://en.wikipedia.org/wiki/Sampling_(statistics)
16
non-Government section was categorised into trade and industry, professionals (chartered
accountants and tax professionals) and general public. The responses have been collected
based on the availability of the respondents in the limited time that was available for data
collection.
Number of
Duration
Categories
Details
Commissioner,
10 (8 State + 2
40 minutes
Additional Commissioners,
Centre)
to 120
Respondents
minutes
Deputy Commissioners,
5 ( 4 State + 1
20 minutes
officials
Assistant Commissioners
Centre)
to 30
minutes
staff
Centre)
to 15
minutes
Customs
Trade and Industry
20 minutes
to 30
minutes
Professionals
11
Consultants
20 minutes
to 30
minutes
General Public
15
2 minutes to
5 minutes
Engineers
Total
117
17
17
18
The sample sizes of the six groups of target audience were limited because of time
constraints. The maximum possible responses were gathered in the time available for
data collection.
The first discussion paper on GST from EC and the Finance Commission Task Force
report on GST were used for designing the questionnaires. Since the draft of the
proposed constitutional amendments required for GST is yet to be released, the exact
details of GST may differ from the referred reports/papers.
The awareness of GST among the tax department staff was poor. Therefore the
training needs mentioned by this group were not specific.
Data has only been collected in Bangalore. The commercial tax offices in other
districts of Karnataka have not been covered.
Analysis of the level of agreement to statements on GST has been done separately for
each statement only. Analysis of total of averages was not done because of difficulty
in estimating the weights for individual statements.
19
20
4.1 PART - I
The analysis of data and interpretation has been done separately for each group of target
audience. It is presented in the following order (1) top officials, (2) middle level tax officials,
(3) tax department staff, (4) trade and industry, (5) professionals, and (6) general public18.
4.1.1
The information gathered from 10 officials of CTD, FD, NACEN and LTU on some aspects
of GST are given below:
Impact of GST on effectiveness and efficiency of the revenue system
The general view was that GST will enhance the effectiveness and efficiency of the revenue
system in the long run. Majority of respondents estimated the time required for this change to
be between 3 to 5 years. Some officers think it may take more than 5 years to stabilise the
new system. Information Technology systems will be used extensively to track transactions at
every step of a supply chain which is currently not the case. GST is expected to widen the tax
base. For this tracking of transactions is essential. Any discontinuity in the tracking system
will have a detrimental effect on the effectiveness of the tax system. Taxpayers try to avoid
taxes by taking advantage of the differences in rates in different region, and the exemptions
provided by the government. By developing a uniform tax system across the country and by
tracking every transaction, effectiveness of the system will be enhanced. Also, the Centre and
the State will be administering a common base. This double check is expected to make the
system effective. The efficiency of the system is expected to increase through simplification
of procedures and eliminating unnecessary steps. IT systems will reduce the cost and time
involved in administration. At the same time, compliance costs will come down for the
dealers. This will create a win-win situation for the Government and the Industry.
Implementing faster means for dispute resolution will also enhance the efficiency of the
system.
18
As a result of this arrangement some suggestions appear to be repeated but they are meant for a particular
group.
21
Food items
For the poor, the proportion of expenditure on food to income is far higher than the
average. In 2005, on average, food accounted for one-third of total private consumer
expenditure19. Therefore taxing food will have a major impact on the poor. All
respondents were of the opinion that unprocessed food that is a major component of
food consumed by the poor should be exempted. If not exempted, it should be taxed at
a lower rate.
Land by its very nature does not fall under good or service as it is immovable.
But in Canada, New Zealand and Australia, housing and construction is
treated just like any other commodity.
19
22
It forms a major portion of the revenue for the State government20. Thus
bringing it under GST would be risky, especially considering the loss in
revenue that may occur. Moreover, in India States do not levy income tax
which is not the case in countries like Canada. It can be brought under GST
once the implementation is stabilized and there is more clarity in the system.
Financial Services
Every respondent was of the view that taxing financial services is a difficult task. The
explicit service charges that are charged by the service providers will be taxed, but
taxing the implicit benefits21 that the financial services get cannot be ascertained.
20
Audit Report (Revenue), Karnataka (2008-09): In 2008-2009, Stamps and Registration fees along with land
revenue accounted for Rs. 3182.37 crores. This is 11.5 percent of the total tax revenue of Rs. 27,645.66 crores
21
The excess of interest rate on the loan over the rate of interest or cost of funds to the bank for that loan is the
implicit income for the bank.
23
How data will be shared on real time basis between the States and the Centre is an
area that needs investigation.
24
On compensation of revenue loss for the States, there was demand for 100 percent
compensation. This will give the confidence to the States to move forward with GST
without any worries. Some states are increasing their VAT rates in order to seek a
higher compensation from the Centre. This kind of behavior by the States will hinder
the progress in implementation of GST.
22
25
Modes of training
The modes of training that can be adopted will depend on the time left to prepare for GST. It
will also depend on training capacity, i.e., the number of officials/staff members that can be
trained per day. With enough time for preparation, of about a year, both formal and hands
on training modes can be used. Formal training should be adopted to educate the employees
about the objectives, benefits, expected problems, acts and rules. This should be followed by
a hand on training that would be more specific to the role of the employee within the
department. Different sections of the department should be trained on the procedures, rules
and scope of their job. A realistic environment should be simulated for trainees to have a
practical experience before the actual implementation of GST. This will improve the
confidence of the tax department as well as that of the Industry.
Issues in training programs during transition to VAT
In August 2001, the Government of Karnataka appointed Crown Agents23 (technical
consultants) to provide technical assistance to the CTD at a total cost of Rs. 20.33 crores, to
assist in transition from the then Sales tax regime to the VAT regime. Crown Agents of UK
conducted training of trainers (ToT), developed the application software and supported the
communication processes, basically holding the departments hands till the VAT program
was up and running. The feedback received from the tax department officials and staff on the
training is not satisfactory. The reasons for dissatisfaction are given below:
Time gap between the training programs and introduction of VAT: The department
imparted training to its staff between November 2001 and July 200324 on VAT
implementation and administration covering the modules relating to registration,
returns and payment, refunds, input tax credits, debt management and audit. But VAT
for introduced on April 1, 2005.
23
Crown Agents (Crown Agents for Oversea Governments and Administrations Limited) is an international
development company delivering capacity-building and institutional development consultancy services in public
sector transformation, particularly in revenue enhancement and expenditure management, banking, public
finance, training and procurement. Crown Agents works with the public and private sectors in more than one
hundred countries, and for international development agencies and institutions.
24
CAG report 2008-2009 (Section 2.2.7.6)
26
Lack of synchronization between trainee and trainer: The trainees were not
comfortable with the trainers. There were communication problems between CTD
employees and the trainers.
Attitude of staff towards training was not positive: Attitude is a major concern cited
by all most all the officials. Aligning the employees to achieve the objectives of GST
is one of the most challenging tasks during the transition. Officials are more
concerned about the attitude of grass root level staffs that are ignorant and reluctant
towards training programs.
27
Preparation of the Government and the trade and industry for GST. A hasty
implementation of GST without much preparation may lead to problems that may in
turn increase administration costs.
Changes in revenue level for the State as well as the Centre. Though GST is
accepted to be beneficial in the long run, whether these benefits will result in
increase in revenue in the short run is not certain.
Coordination and Integration of the State tax systems and the Central tax system.
28
Suggestions
Tax structure
The deviation from flawless GST should be kept to a minimum.
Computerization
Automate the manual tasks to enhance efficiency and transparency. The CTD staff,
especially staff at grass root level should be trained on computer skills.
26
http://www.trpscheme.com: The Government of India Tax Return Preparers Scheme to train unemployed and
partially employed persons to assist small and medium taxpayers in preparing their returns of income has now
entered its Second Phase. During its launch year, on a pilot basis, close to 5,000 TRPs at 100 centers in around
80 cities across the country were trained. 3737 TRPs were certified by the Income Tax Department to act as Tax
Return Preparers, who assisted various people in filing their IT Returns. The Government has now decided to
increase their area of operations by including training on TDS returns and Service Tax returns to these TRPs.
27
http://www.tinxsys.com/: TINXSYS is a centralized exchange of all interstate dealers spread across the
various States and Union territories of India. TINXSYS is an exchange authored by the Empowered Committee
of State Finance Ministers (EC) as a repository of interstate transactions taking place among various States and
Union Territories. TINXSYS helps the Commercial Tax Departments of various States and Union Territories to
effectively monitor the interstate trade.
29
30
4.1.2
The information gathered from 5 officials (Joint Commissioners and Deputy Commissioners)
of CTD and LTU are analysed in this section. The responses gathered on the opinionnaire on
GST are tabulated below. The tables give the attribute (KUAS)28, the statement, and the
average level of agreement to the statement. The table below consists of statements for which
positive response/agreement was expected. (Agreement Scale: 2 = Strongly Agree;
1 = Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree).
Table 1: Level of agreement to statements for which positive response/agreement was expected from middle level tax
officials
Sl. No
1
2
3
Attribute
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
28
K
K
K
K
K
K
U
U
A
A
A
A
A
A
Statement
GST can be integrated with Unique Identification Number (UID).
GST can be linked to PAN/TAN.
GST encourages voluntary compliance.
GST will result in increase in revenue for both Centre and State
through increase in tax compliance.
The awareness of GST among public needs to be improved.
The awareness of GST has increased since it was first announced
in 2007-2008.
The classification of taxes is clear in GST.
The definitions of taxable events are clear in GST.
The Inter-State transactions are defined in GST.
There is a need for public debate on GST.
GST enables effective audit.
GST minimizes tax evasion.
The jurisdiction for appeals is a cause for concern once GST is
implemented.
The nature of GST does not allow it to be rolled out like VAT.
The supply chain arrangement for manufacturing and distribution
becomes critical in GST.
There is a need to develop cross-border information systems in
the implementation of GST.
There should be uniformity in the tax system across the country.
Processing International transactions will be easier in GST.
Record keeping will be minimal in GST.
Tax based on final retail price of a product is easy to administer.
Tax payments in GST will be easier compared to other systems.
The capacity of staff needs to be enhanced to implement GST.
The current staff strength is sufficient to implement GST.
Use of Information technology will ensure greater transparency in
administration of GST.
Average
0.60
1.20
0.60
1.00
2.00
0.80
0.00
0.60
0.60
2.00
0.20
-0.40
0.20
1.00
1.20
1.60
2.00
0.20
0.00
0.60
1.20
1.20
-0.40
1.60
31
25
The following statements were not agreed to as expected, i.e. the statements received an
average level of agreement of zero or less.
The table below consists of statements for which a negative response/disagreement was
expected.
Table 2: Level of agreement to statements for which negative response/disagreement was expected from middle level
tax officials
Sl. No
Attribute
3
4
5
6
A
A
A
A
Statement
The current dispute resolution process is adequate for
implementation of GST.
The current procedures to prevent tax evasion are adequate even for
GST.
GST is not simple to administer.
Issue of refunds will be difficult in GST.
The current database is sufficient for implementation of GST.
The tax reporting period would vary with implementation of GST.
Average
-1.00
-0.60
0.20
-0.60
-1.40
-0.40
The statement GST is not simple to administer received an average level of agreement of
0.20. This shows that some officials have a perception that GST will not be simple to
administer.
32
Training Received
The respondent from LTU had received training on GST. The other four respondents from
CTD had not received training on GST.
Main Source of understanding GST
The main source of understanding GST has been the first discussion paper on GST released
by the Empowered committee or the Finance Commission Task Force Report on GST. The
figure below gives the number of respondents who used a particular source to understand
GST.
Figure 1: Main source of understanding GST for middle level tax officials
0
0
Newspapers EC Discussion
and Magazines Paper or Task
Force Reports
Others:
Seminars/
Workshops/
Discussions
None
Training Needed
Inter-state Transactions
o How to ascertain tax payments in other states
o How to check authenticity of dealers of other states
33
Capacity building of officers of staff, especially the grass root level employees.
Suggestions
The problems in the current VAT system have to be investigated and steps should be
taken to eliminate these problems in GST.
o Process to select cases for re-assessment. The process currently followed is not
scientific.
o In KVAT 2005, the penalty provisions and interest provisions pursuant to reassessment are harsh as there is no discretion.
34
4.1.3
Responses gathered from Inspectors and Superintendents of Central Excise and Customs and
the CTD are analysed in this section.
4.1.3.1 Central Excise and Customs
Responses were gathered from 42 Inspectors and Superintendents. The responses to the
opinionnaire on GST are tabulated below. The tables give the attribute (KUAS), the
statement, and the average level of agreement to the statement. (Agreement Scale:
2 = Strongly Agree; 1 = Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree)
The table below consists of statements for which positive response/agreement was expected.
Table 3: Level of agreement to statements for which positive response/agreement was expected from Central Excise
and Customs Department staff
Sl. No
Attribute
3
4
Statement
Average
0.88
0.79
1.67
0.83
1.19
0.31
The statement, Record keeping will be minimal in GST received an average level of
agreement of 0.31. This shows that not many staffs think that paper work will be reduced
under GST. Officials pointed out that they will move towards creating paperless offices
through extensive use of IT.
35
Sl. No
Type
Statement
Average
-0.12
The statement, Issue of refunds will be difficult in GST, received an average level of
agreement of -0.12.
0.12. Thus, it can be concluded that many disagree to this statement.
Training Received
Out of the 42 respondents, four respondents have received training on awareness of GST. The
figure below shows the percentage of respondents who have received/not received training on
GST.
Figure 2: Percentage off respondents from Central Excise and Customs who have received/ not received training on
GST
Training Received
10%
Yes
No
90%
36
10
5
0
0
Newspapers EC Discussion
Others:
and Magazines Paper or Task Trainings and
Force Reports Discussions
None
Training Needed
37
Responses were gathered from 10 Inspectors and Superintendents. The responses to the
opinionnaire on GST are tabulated below. The tables give the attribute (KUAS), the
statement, and the average level of agreement to the statement. (Agreement Scale:
2 = Strongly Agree; 1 = Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree)
The table below consists of statements for which positive response/agreement was expected.
Table 5: Level of agreement to statements for which positive response/agreement was expected from CTD staff
Sl. No
Attribute
3
4
5
A
A
Statement
Average
0.80
1.20
1.70
1.00
1.00
1.10
Sl. No
Attribute
Statement
Average
0.10
Issue of refunds will be difficult in GST, received an average level of agreement of -0.12.
Thus, it can be concluded that not many disagree to this statement.
Training Received
Training on GST has not been conducted for CTD officials and staffs. Even if the legislation
on GST is not ready, the staff can be prepared for the change. Staff should be educated about
the objectives and benefits of GST. This will make the staff discuss the aspects of GST.
Effort should be made to keep the staff updated on the progress towards GST.
38
No. of
Respondents 3
(Total: 10)
2
2
1
1
0
Newspapers EC Discussion
and Magazines Paper or Task
Force Reports
Others:
Discussions
None
Training Needed
One respondent said, Department is totally not aware of GST. Training is required on all
aspects especially computerization and software skills. The training needs are given below:
Practical problems that may hinder the administration of GST and how to overcome
these problems.
The general view is that a complete training is required on all aspects of GST. The needs
expressed by many respondents were not specific. This was probably because of lack of
awareness of GST.
39
4.1.4
Responses were gathered from 24 dealers. Their responses to the opinionnaire on GST are
tabulated below. The tables give the attribute (KUAS), the statement, and the average level of
agreement to the statement. (Agreement Scale: 2 = Strongly Agree; 1 = Agree; 0 = Neutral;
(-1) = Disagree; (-2) = Strongly Disagree)
The table below consists of statements for which positive response/agreement was expected.
Table 7: Level of agreement to statements for which positive response/agreement was expected from Trade and
Industry
Sl. No
Attribute
Statement
1.04
0.88
6
7
U
U
-1.08
-0.27
0.04
10
11
1.91
12
0.52
13
0.00
14
0.83
15
16
GST will provide more support to trade and industry through wider
coverage of input tax credit.
The awareness of GST has increased since it was first announced
in 2007-2008.
Average
1.57
1.25
0.88
0.61
1.32
1.38
0.79
40
The following statements received an average level of agreement of less than 0.5:
This shows trade and industry clearly disagree to the dual structure of GST. Also, pricing of
goods and services should not be a major issue in the GST system. Respondents see no
change in recording keeping in GST compared to the current VAT system.
The table below consists of statements for which a negative response/disagreement was
expected.
Table 8: Level of agreement to statements for which negative response/disagreement was expected from Trade and
Industry
Sl. No
1
2
Attribute
K
A
Statement
Exemptions benefit tax payers.
GST is not simple to administer.
Average
0.14
0.13
Though on average the statement, Exemptions benefit tax payers has received a positive
response, it is very close to a neutral response. This shows respondents are neutral towards
exemptions.
41
Training Received
Fourteen out of the twenty four respondents have either attended seminars or workshops on
GST. The figure below shows the percentage of respondents who have attended/ not attended
seminars or workshops on GST.
Figure 5:: Percentage of respondents from trade and industry who have attended seminars or workshops on GST
Training Received
Yes
42%
No
58%
42
18
14
15
No. of Respondents
10
(Total: 24)
0
0
Newspapers and
Magazines
EC Discussion
Paper or Task
Force Reports
Others: Seminars
and Workshops
None
Training Needed
Regulatory requirements of GST on all business areas and at every level of business
from manufacturer to the final consumer.
Time available for preparation to migrate to GST and infrastructure to sustain it.
Separate GST for the Centre and the State will make it no different from the current
VAT system.
ERP systems are used extensively to run businesses. Making necessary architectural
changes in ERP systems will take time.
43
Suggestions
Invite participation from all stake holders. Discussions should be held outside the
walls of empowered committee to ensure that no question is left unanswered. Queries
from trade and industry should be invited to prepare FAQ on GST.
The Government should support the Industry during the initial period of change to
GST.
The administrative mechanism should be proactive and trade facilitating rather than a
mere tax collecting body.
Objectives of VAT were also to create a uniform market. But this did not happen.
Proper steps should to be taken to avoid any deviations from the set objectives.
44
4.1.5
Professionals
Responses were gathered from 11 chartered accountants. Their responses to the opinionnaire
on GST are tabulated below. The tables give the attribute (KUAS), the statement, and the
average level of agreement to the statement. (Agreement Scale: 2 = Strongly Agree; 1 =
Agree; 0 = Neutral; (-1) = Disagree; (-2) = Strongly Disagree)
The table below consists of statements for which positive response/agreement was expected.
Table 9: Level of agreement to statements for which positive response/agreement was expected from Professionals
Sl. No
Attribute
5
6
7
8
9
10
11
12
13
14
15
16
17
18
K
K
U
U
A
A
A
A
Statement
GST will provide more support to trade and industry through wider
coverage of input tax credit.
Pending cases related to the old system come in the way of
implementing GST.
The awareness of GST among public has to be improved.
The awareness of GST has increased since it was first announced
in 2007-2008.
The classification of taxes is clear in GST.
The definitions of taxable events are clear in GST.
There is a need for public debate on GST.
Direct tax subsidy is a better option than exemptions.
The Centre and State must have separate GST.
The supply chain arrangement for manufacturing and distribution
becomes critical in GST.
There is a need to develop cross-border information systems in the
implementation of GST.
There should be uniformity in the tax system across the country.
GST will be simple to administer.
Processing International transactions will be easier in GST.
Record keeping will be minimal in GST.
Tax based on final retail price of a product is easy to administer.
Use of Information technology will ensure greater transparency in
administration of GST.
With the introduction of GST, companies will have to relook at their
business processes.
Average
1.09
0.00
0.82
0.55
0.55
0.64
1.18
0.36
-0.36
0.09
1.00
1.55
0.45
0.64
0.09
0.91
1.00
0.91
The following statements received an average level of agreement of less than 0.5.
1. Pending cases related to the old system come in the way of implementing GST.
2. Direct tax subsidy is a better option than exemptions.
3. The Centre and State must have separate GST.
4. The supply chain arrangement for manufacturing and distribution becomes critical in
GST.
5. Record keeping will be minimal in GST.
45
Professionals, like trade and industry do not agree to the concept of dual structure of GST.
The agreement to Record keeping will be minimal in GST is close to neutral, which similar
to the response from tax department staff.
The table below consists of statements for which a negative response/disagreement was
expected.
Table 10: Level of agreement to statements for which negative response/disagreement was expected from
Professionals
Sl. No
1
Attribute
Statement
Exemptions benefit tax payers.
The current procedures to prevent tax evasion are adequate even
for GST.
Average
0.91
0.09
Professionals agree that exemptions benefit tax payers. This is unlike the response from trade
and industry, which was neutral towards benefits from exemptions. Professionals are almost
neutral on the current procedures being adequate to prevent tax evasion. Thus procedures to
prevent tax evasion need to be improved.
46
Training Received
Two out of thee eleven respondents have either attended seminars or workshops on GST. The
figure below given shows the percentage of respondents that have attended/ not attended
seminars or workshops on GST.
Figure 7:: Percentage of respondents from
f
the professionals group who have attended seminars/workshops on GST
Training Received
18%
Yes
No
82%
47
4
2
0
Newspapers EC Discussion
and Magazines Paper or Task
Force Reports
Others:
Seminars/
Workshops
None
Seminars/Workshops Needed
The benefit and drawbacks of GST system in comparison to the current system.
Major differences between the current system and the new system.
Capacity of the tax department is a concern. Adequate training should be given to the
staff and the objectives of GST should be clearly understood by them.
48
Suggestions
Government should conduct workshops and training programs in partnership with the
following institutions
o Institute of Chartered Accountants of India
o Chamber of Tax Consultants
o Bombay Chartered Accountant Society
o Other Trade and professional bodies
49
4.1.6
General Public
The data gathered from 15 people from the general public are analysed in this section.
Responses were collected from post graduate students, government employees and software
engineers, etc. Their responses to the opinionnaire on GST
GST are tabulated below. The tables
give the attribute (KUAS),
KUAS), the statement, and the average level of agreement to the statement.
(Agreement Scale: 2 = Strongly Agree; 1 = Agree; 0 = Neutral; (-1)
( 1) = Disagree;
(-2) =
Strongly Disagree)
The table below consists
ists of statements for which positive response/agreement was expected.
Table 11: Level of agreement
ent to statements for which positive response/agreement
response/
was expected from general public
Sl. No
1
2
Attribute
K
K
Statement
The awareness
areness of GST has increased since it was first announced
in 2007-2008.
2008.
There is a need for public debate on GST.
Average
0.06
0.71
The general public on average agrees that awareness on GST has increased very slightly since
2007-2008.
2008. And they also see the need for public debate on GST.
Awareness of GST and VAT
The graph below shows the percentage of the respondents from general public who claim to
be aware/not aware of GST.. Seventy three percent claim that they are aware of GST. This
may be attributed to reports
eports and news articles about the progress on GST by media.
Figure 9:: Percentage of respondents from general public who claim to be aware of GST
Awareness of GST
27%
Yes
No
73%
50
The graph below shows the percentage of the respondents from general public who claim to
be aware/not aware of VAT.. Ninety three percent claim that they are aware of VAT. After
five years of implementation of VAT in the State, this was expected.
Figure 10: Percentage
centage of respondents from general
gen
public who claim to be aware of VAT
Awareness of VAT
7%
Yes
No
93%
The
he graph below shows the percentage of the respondents from general public who claim to
be aware/not aware of the proposed date for implementation of GST (April 1, 2011).
2011) Only
thirteen percent claim to be aware of this. This shows that
that they are not following the progress
on GST.
Figure 11: Percentage
centage of respondents from general
gen
public who claim to be aware of the proposed date for
implementation of GST
51
33%
Yes
No
67%
The graph below shows the percentage of the respondents from general public who claim to
understand/not understand the concept of VAT.
VAT Sixty seven percent said that they understand the
concept of VAT. And thirty three percent said that they understand the concept
concept of GST. This shows
that educating the public on GST will not be difficult.
Figure 13:: Percentage of respondents
responde
from general public who claim to understand the concept of VAT
Yes
No
67%
33%
52
4.2 PART II
The two hypotheses formed were tested and the results are given below:
4.2.1
Hypothesis 1
Null Hypothesis: Tax department staffs with an experience of more than 20 years do not
differ significantly from staffs with an experience of 20 years or less in their agreement to
use of information technology for greater transparency in administration of GST.
Alternate Hypothesis: Tax department staffs with an experience of more than 20 years
differ significantly from staffs with an experience of 20 years or less in their agreement to
use of information technology for greater transparency in administration of GST.
Table 12: T-Test results for Hypothesis 1
Group Statistics
Use of Information
Std. Error
Experience N
Mean
Std. Deviation
>= 20.00
18
1.06
1.11
0.26
< 20.00
20
1.40
0.68
0.15
Mean
-1.134
df
27.62
Sig. (2-
Mean
Std. Error
Interval of the
tailed)
Difference
Difference
Difference
0.27
-0.34
0.30
Lower
Upper
-0.96
0.28
The above table reveals that the p-value or the critical significance level of 0.265 is greater
than 0.05 (5 percent) level of significance. Thus the null hypothesis formed is accepted.
Therefore, staffs with 20 years experience or more do not differ significantly from staffs with
lesser than 20 years experience in their agreement to use of information technology for
greater transparency in administration of GST.
53
On the basis of the above test it can be concluded that years of work experience is not an
influencing factor for agreement to use of information technology.
4.2.2
Hypothesis 2
Null Hypothesis: Trade and Industry agree to the dual structure of GST, i.e. separate GSTs
of the Centre and the State.
Alternate Hypothesis: Trade and Industry do not agree to the dual structure of GST, i.e.
separate GSTs of the Centre and the State.
Table 13: T-Test results for Hypothesis 2
One-Sample Statistics
Mean
Std. Deviation
24
-0.88
.90
.18
One-Sample Test
Test Value = 1
95% Confidence
t
-10.21
df
23
Interval of the
Sig. (2-
Mean
tailed)
Difference Difference
.00
-1.86
Lower
Upper
-2.26
-1.50
The above table reveals that the p-value or the critical significance level of .00 is lesser than
0.05 (5 percent) level of significance. Thus the null hypothesis formed is rejected and the
alternate hypothesis that Trade and Industry do not agree to the dual structure of GST is
accepted.
54
55
6. The percentage of audit coverage which was mere 1.59 percent to 3.24 percent. Reasons
for not auditing all the cases selected for audit was not forthcoming.
The problems identified should be rectified in the GST system. Learning from the transition
to VAT should be used to reduce transition costs. With the experience of carrying out the
transition to VAT in 2005, officials are confident about a smooth transition. The transition
from VAT to GST is small when compared to the transition from Sales tax to VAT. But their
concern is preparing the staff for GST that is expected to depend more on information
technology.
The Central tax departments have started preparation by conducting workshops on creating
awareness of GST among their staff. But CTD Karnataka has not conducted any training on
GST to its staff. There are about 9000 employees in CTD. It was estimated that at least 6
months would be required for training. But this will depend on the training capacity and
facilities available.
Trade and Industry, and professionals have expressed their concerns about the capacity of the
CTD staff to handle GST. They have also raised concerns about the time that will be
available for preparation after the GST legislation is passed, if GST is to be implemented
from April 1, 2011.
The following four areas were identified as critical areas for successful
implementation of GST.
o IT Infrastructure
o Capacity building of CTD
o Coordination and Sharing Information between the Centre and the States
o Educating trade and industry about the changes. For this, CTD needs to be
ahead of trade and industry
Forty two percent of respondents from trade and industry had attended seminars or
workshops on GST. But no awareness programs were conducted for CTD staff.
56
This shows that the government needs to build capacity quickly to handle queries
from trade and industry.
Trade and Industry, and professionals are not happy with the dual structure of GST.
They have on average disagreed to the dual structure of GST, which they feel is a
flaw in the structure.
Years of work experience of staff is not an influencing factor for agreement to use
of information technology.
Trade and Industry has not received any significant input on GST from the State
government.
57
5.2 Recommendations
Training Programs for CTD
The following recommendations are related to the training programs for educating the CTD
about GST.
Conduct an attitude building training so that the training programs for effective and
learning takes place. The officials of CTD are concerned about the attitude of the staff
towards training.
Officials and staff should be evaluated on improvements in KUAS (Knowledge,
Understanding, Application and Skills) after attending training programs.
Some trainers should be selected from pool of officials of CTD. This will ensure that
the trainers remain with the department and act as reference points for conducting
training programs in future.
Experts from trade and industry can also be invited to provide training to CTD. This
will enable the official and staff to understand the industry perspective.
CTD should start with awareness and sensitisation programs on GST for official and
staff. This can be done in a phased manner without any formal training. Open
discussion on aspects of GST on a weekly basis or fortnightly basis. Pamphlets with
information on GST should be distributed and put on notice boards. This will prepare
the officials and staff for the change. The change to GST should be justified, so as to
avoid any resistance during the transition.
Currently, CTD does not have a training institute dedicated to attend to its training
needs on revenue collection and taxation. CTD should be associated to a training
institute to attend to its training needs on a continuous basis.
During transition to VAT, Crown Agents from UK were appointed to conduct training
programs, but this is only a temporary solution. Training was not conducted after
implementation of GST. Training should be conducted regularly after implementation
of GST to keep the employees updated about the best practices and changes in the
system.
Any consultant hired to assist in implementation of GST should be an agency with the
following experience.
o Tracked the Indian tax system for at least 10 years
o Tracked the tax systems of other countries that have implemented GST during
their transition.
58
Align the organizational structure of the Centre and the State tax departments.
For economies of scale, a single agency, either the Centre or the State should be
appointed for tax collection in a particular State.
In the long term, the recruitment process, incentives, etc., should be aligned to avoid issues
relating to difference in treatment of employees of the State and the Centre.
Educating Trade and Industry, Professionals and Public
CTD should invite queries from all stakeholders CTD officials and staff, trade and
industry, professionals and public so that answers to FAQs can be prepared.
Public should be educated on the dual structure and visibility of CGST which was till
now not visible. Canadian experience shows that consumers can view this as a new
tax on goods and services.
Others
The audit reports from CAG of the past years of VAT regime should be thoroughly studied to
identify problems and improvement areas.
Separate units should be setup to concentrate on large tax payers like the Large
Taxpayer Units. Since a big percent of taxes are paid by a small number of taxpayers,
it makes sense to concentrate on these major contributors. LTUs were setup with the
experience on the CBDT and the CBIT to provide single window facilitation to
taxpayers who pay direct and indirect taxes above a threshold limit.
Introduce schemes like TRPS (Tax Return Preparer Scheme) that was introduced by
the Income Tax Department in partnership with NIIT to build capacity of facilitators.
59
The current study can be conducted with focus on a specific group with a larger
sample size.
Study of attitude of CTD employees towards training programs. This can be taken up
before and after an attitude building training is conducted.
The computers and backup systems need to be upgraded both in quality and quantity.
These IT systems should be studied. A study can be taken up to identify problems and
improvements required in IT infrastructure. An estimation of hardware requirements
can be one of the results of the study.
Study of the TRPS (Tax Return Preparer Scheme) that was introduced by the
Income Tax Department in partnership with NIIT. Develop a similar scheme for CTD
to build capacity outside the department to facilitate tax payments.
60
6 Bibliography
A brief on VAT. (n.d.). Retrieved April 2010, from GOK Commercial Tax Department:
http://164.100.80.121/ctax/what_vat/About%20vat%20nnew.pdf
Bagchi, A., & Poddar, S. (September 2006). GST for India: Some Basic Questions.
Bird, R. M., & Gendron, P.-P. (May 2009). Sales Taxes in Canada: The GST-HST-QST-RST
SYSTEM.
CAG. (n.d.). Audit Report (Revenue) Karnataka (2008-2009). Retrieved June 2010, from CAG:
http://www.cag.gov.in/html/cag_reports/karnataka/rep_2009/rev_chap2.pdf
Chellaih, R., Aggarwal, P., Purochit, M., & Roa, K. (2003). Primer on Value Added Tax. National
Institute of Public Finance and Policy.
Commercial Taxes Department. (n.d.). Retrieved April 2010, from GOK Commercial Taxes
Department: http://164.100.80.121/ctax/index.asp
Force, T. (December 2009). Report of the Task Force on Goods and Services Tax. Thirteenth Finance
Commission.
GST Start-up Assistance Office. (n.d.). Retrieved June 2010, from http://www.gststartup.gov.au/
James, S., & Alley, C. (2008, July). Successful tax reform: the experience of value added tax in the
United Kingdom and goods and services tax in New Zealand. Retrieved June 2010, from Munich
Personal RePEc Archive (MRPA): http://mpra.ub.uni-muenchen.de/19858/
Kothari, N. (2009, June). Proposed Indian GST and its impact on Industry.
Large Taxpayer Unit. (n.d.). Retrieved June 2010, from http://www.ltu.gov.in
Ministers, T. E. (November 2009). First discussion paper on Goods and Services Tax in India.
Poddar, S., & Ahmad, E. (March 2009). GST Reforms and International considerations in India.
Department of Economic Affairs, MoF, GoI.
Purohit, M. C. (June 2009). A Road Map for GST. Foundation for Public Economics and Policy
Research.
R, S. (n.d.). Tax Exemptions in GST - Principles and Practices. Retrieved June 2010, from The
Institute of Chartered Accountants in India (ICAI):
http://www.icai.org/resource_file/15963article_GST.pdf
Tax Return Preparers Scheme. (n.d.). Retrieved June 2010, from http://www.trpscheme.com/
Zanwar, M. (Jan 2010). Practical approach for implementation of GST. Bombay Chartered
Accountants Journal , 17-19.
61
7 Appendix
7.1 Appendix 1: Interview questions for Top Officials
Migration to GST
1. Do you consider that GST would enhance efficiency and effectiveness of revenue
collection in 0-1 year, 1-3 years, 3-5 years, not at all
2. How should GST be considered in the context of
Food items
Financial Services
Formal training
On job training
Handholding
Mailing groups
62
Seminars
Debates
Mass media
Discussions
8. How intensely / widely do you plan to use information technology for training
Other
9. How easy is it to reorient staff to new system within the first year itself?
10. What are the implementation/organizational constraints/risks you foresee in the
implement of GST?
11. What are the suggestions you wish to offer to mitigate these constraints?
12. According to you how long would it take to put in place the processes/HR systems to
be institutionalized?
13. How easy or difficult is it to co-ordinate and collaborate between the Centre and the
State governments.
14. What are the concerns of the State and the Centre in sharing information with other
agencies?
63
Strongly Disagree
5
Strongly Disagree
Strongly Disagree
Strongly Disagree
The nature of GST does not allow it to be rolled out like VAT.
1
2
3
4
5
Strongly Agree
Strongly Disagree
64
GST will result in increase in revenue for both Centre and State through increase in tax
compliance.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Agree
Strongly Disagree
The jurisdiction for appeals is a cause for concern once GST is implemented.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
65
Strongly Disagree
Strongly Disagree
5
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
With the introduction of GST, companies will have to relook at their business processes.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
66
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
The supply chain arrangement for manufacturing and distribution becomes critical in GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
The current procedures to prevent tax evasion are adequate even for GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Personal Details
Please mention your name, designation and email address. This information will not be used
to reveal your identity. We may use this information to communicate with you on our future
assignments on GST. Providing this additional information is optional.
Name:
Designation:
Email Address:
68
Thank you for taking an interest in this questionnaire. Please go through the information
given below before you start.
This questionnaire is part of a project to capture the knowledge, understanding, application
and skills of the Government and the Industry relating to Migration to GST (Goods and
Services Tax). The conduct of this study is governed by Fiscal Policy Institute, Bangalore.
All your answers will remain confidential and no information reported will ever identify you
based on your answer.
We are keen to receive your answers to this questionnaire so please feel free to contact us
with any queries you may have. Contact Shiva Raman by email: shivaraman.s@iiml.org or
by mobile: +91-7760017180
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
There is a need to develop cross-border information systems for the implementation of GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
69
Strongly Disagree
Strongly Disagree
Personal Details
Please mention your name, designation and email address. This information will not be used
to reveal your identity. We may use this information to communicate with you on our future
assignments on GST. Providing this additional information is optional.
Name:
Designation:
Email Address:
70
Strongly Disagree
5
Strongly Disagree
Strongly Disagree
GST will provide more support to trade and industry through wider coverage of input tax
credit.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
71
Strongly Disagree
Strongly Disagree
With the introduction of GST, companies will have to relook at their business processes.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
The supply chain arrangements for manufacturing and distribution become critical in GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
72
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
73
Personal Details
Please mention you name, designation, email address and work experience in years. This
information will not be used to reveal your identity. We may use this information to
communicate with you on our future assignments on GST. Providing this additional
information is optional.
Name:
Designation, Company:
Email Address:
Work experience in years:
74
Thank you for taking an interest in this questionnaire. Please go through the information
given below before you start.
This questionnaire is part of a project to capture the knowledge, understanding, application
and skills of the Government and the Industry relating to Migration to GST (Goods and
Services Tax). The conduct of this study is governed by Fiscal Policy Institute, Bangalore.
All your answers will remain confidential and no information reported will ever identify you
based on your answer.
We are keen to receive your answers to this questionnaire so please feel free to contact us
with any queries you may have. Contact Shiva Raman by email: shivaraman.s@iiml.org or
by mobile: +91-7760017180
Strongly Disagree
5
Strongly Disagree
Strongly Disagree
GST will provide more support to trade and industry through wider coverage of input tax
credit.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
75
Strongly Disagree
Pending cases related to the old system come in the way of implementing GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
Strongly Disagree
With the introduction of GST, companies will have to relook at their business processes.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
76
The supply chain arrangement for manufacturing and distribution becomes critical in GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
The current procedures to prevent tax evasion are adequate even for GST.
1
2
3
4
5
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Agree
Strongly Disagree
Strongly Disagree
Strongly Disagree
77
Personal Details
Please mention your name, designation, email address and work experience in years. This
information will not be used to reveal your identity. We may use this information to
communicate with you on our future assignments on GST. Providing this additional
information is optional.
Name:
Designation, Company:
Email Address:
Work experience in years:
78
Thank you for taking an interest in this questionnaire. Please go through the information
given below before you start.
This questionnaire is part of a project to capture the knowledge, understanding, application
and skills of the Government and the Industry relating to Migration to GST (Goods and
Services Tax). The conduct of this study is governed by Fiscal Policy Institute, Bangalore.
All your answers will remain confidential and no information reported will ever identify you
based on your answer.
We are keen to receive your answers to this questionnaire so please feel free to contact us
with any queries you may have. Contact Shiva Raman by email: shivaraman.s@iiml.org or
by mobile: +91-7760017180
Strongly Disagree
Strongly Disagree
Personal Information
Please mention you name, occupation, email address, age and work experience in years. This
information will not be used to reveal your identity. We may use this information to
communicate with you on our future assignments on GST. Providing this additional
information is optional.
Name:
Occupation:
Email Address:
Age:
Work experience in years:
80
81
82
7.9 Appendix 9: Details of tax revenue realised during the period from
2004-05 to 2008-09
The following table presents the details of tax revenue realised during the period from 200405 to 2008-09 (Section 1.1, Audit Report (Revenue Receipts) Karnataka for the year ended
31 March 2009)
Sl.
No
Head of
revenue
Taxes on sales,
1 trade, etc.
2 State excise
2004-05
2005-06
2006-07
2007-08
2008-09
Percentage
change
in 2008-09
over
2007-08
8,700.07
2,805.53
9,869.54
3,396.79
11,761.72
4,495.48
13,893.99
4,766.57
1,759.84
2,212.20
3,205.80
3,408.83
982.99
1,105.45
1,374.50
1,650.13
Taxes on goods
5 and passengers
791.72
1,041.45
1,147.20
837.34
339.023
277.09
388.57
449.5
277.93
330.25
392.58
451.37
295.28
117.76
280.66
116.5
425.05
108.76
380.68
145.31
117.76
16,072.32
116.5
18,631.55
108.76
23,301.03
145.31
25,986.76
Stamp and
3 registration fees
Taxes on
4 Vehicles
Other taxes on
income and
7 expenditure
Other taxes and
duties on
commodities
8 and services
9 Land revenue
Taxes on
agricultural
10 income
Total
83
Additional Demand
Number
Year
of
dealers
Number of
dealers
selected
for audit
Percentage
to number
of dealers
Number
of
dealers
audited
Percentage
of number
of dealers
raised in Audit
Number
Amount
of
(Rs.
Dealers
Lakh)
2005-06
3,54,721
9,646
2.72
5,882
1.66
2,783
3,121
2006-07
3,89,393
17,625
4.53
12,614
3.24
6,783
8,979
2007-08
4,31,029
16,029
3.72
11,029
2.56
7,065
13,328
2008-09
4,34,746
5,343
1.23
6,910
1.59
4,490
18,778
21,121
44,206
Total
48,643
36,435
It may be seen from the above table that in respect of 58 percent of the audited cases, the
department noticed underassessment of tax by the dealers. This also indicated that there was a
need to increase the percentage of audit coverage which was mere 1.59 percent to 3.24
percent. Reasons for not auditing all the cases selected for audit was not forthcoming.
84
7.11 Appendix 11: Data gathered from general public on awareness and
understanding of VAT and GST
Sl. No
Questions
5
6
Yes
No
11
10
12
13
14
10
Table 14: Data gathered from general public on awareness and understanding of VAT and GST
85
86