IRS officers seek Prime Minister’s intervention on GST

Mindful of the Finance Ministry’s warning earlier this month against criticising the Government, a fresh letter to the Prime Minister sent on February 21 by the Indian Revenue Service Association of Customs and Central Excise Officers begins by saying: “First and foremost, it will not be out of place to mention here that we Indians are proud to have you as our Prime Minister—a statesman, a visionary and a true nationalist.”

The letter then goes on to voice their reservations on the conclusions of the GST (Goods and Services Tax) Council to roll out the one nation-one tax-one market scheme and warns of a setback, if not failure, if certain issues aren’t addressed.

Seeking the reversal of many of the decisions, the association says the January 16 outcome would be detrimental to the Centre. “The decision seems to be one-sided in favour of states, weakening the sovereign function of the Centre regarding levy and collection of taxes… GST in this form may not bring the desired goals of better tax compliance, more revenues, ease of business and reduction in inflation and an instant spurt in economic growth,” writes Anup K Srivastava, President of IRS (C&CE) Association.

The demands include the revision of the division of assessees below ₹1.5 crore from the accepted ratio of 90:10 in favour of the states to an equal 50:50 ratio; placing Integrated GST back with the Centre; exclusive role of Centre in territorial waters and the like.

However, the primary problem perhaps was that the central officers would be left with hardly any work with much of it going to the state officers. The letter is candid about this: “In relation to distribution of assessee in the ratio of 90:10 below 1.5 crore, the ratio is unfair and reduces the legitimate work and career aspirations of the officers of Central Board of Excise and Customs (CBEC). This decision would lead to the assessee base of CBEC becoming extremely small bringing into risk the very survival of the department.”

Under Article 258 of the Constitution, the delegation of power by the Centre to the states was an extraordinary power used “only where the Central bureaucracy isn’t” available, he points out. Also, the central officers were selected through the Union Public Service Commission, while the state officers aren’t.

There was the worry of the ubiquitous Indian Administration Service (IAS) encroaching upon the tax domain as well. Srivastava writes the IRS officers have high, specialised expertise in dealing with complex items such as GST than a generalist IAS. But, there was no revenue service representation in the GST Council to give expert advice. The CBEC Chairman was only an invitee and so forth.

Some of the other main concerns, demands and suggestions highlighted by Srivastava in the letter to the PM included:

• The vertical division in the ratio of 90:10 below ₹1.5 crore could lead to only 18% of the assessee base being available with the Centre. With this ratio, the Centre may lose revenue of about Rs1.1 lakh crore.
• IGST assessment errors by state officials would go outside the oversight of Comptroller and auditor general (CAG) and Public Accounts Committee.
• Need for centralised registration for certain sectors. At present, big service tax assessees in sectors such as aviation, telecom and insurance face just one tax assessment point; but in the new GST, they will face 30 different tax administrations. This belies the promise of ‘One Nation One Tax’.
• States have no experience of Service Tax – a very different concept. Divergent views on similar tax issues may emerge across states leading to a plethora of litigations.
• There’s reportedly a 30% failure rate in Karnataka’s invoice matching. With invoice matching now becoming critical, a high failure rate could lead to tax anarchy.
• The GST Network is manned by non-IRS officers at senior levels. Security and financial concerns in GSTN could have been avoided if it was entrusted to CBEC’s Directorate General of Systems. The Chairman and CEO of GSTN should be from IRS, or GSTN should be placed under CBEC.
• Land, liquor and immovable properties that have been kept away from GST, should be included in GST to curb black money generation.

While the officers conceded that the “final call is always with the Government, to which we promise to abide by,” it has to be seen how the Prime Minister’s Office and the Finance Ministry reacts to this letter.