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I was invited to speak at the Michigan Association of School Boards (MASB) 2008 Annual Fall Conference in Traverse City, MI. I'm a veteran school board member, author of several books on leadership and school governance, and former columnist and contributing editor for the American School Board Journal. I spoke on The Art of School Governance and my presentations were well-received.

I was born in South Georgia and have spent my entire life there. I don't have a drawl, but I do have a slight accent; slight at home, perhaps more pronounced (by comparison) in Michigan. After one of my presentations I was winding down by wandering through the resort's gift shop. It had an outstanding selection of Life is goodâ merchandise and some of it was even on sale. I was enjoying browsing and responded, "No, thank you" to her offers to assist me. Other than those three words the only other things I said were, "Yes, I need an XL" and "Thank you for your help" until I started to leave.

She said, "You have a lovely accent."

"I don't have an accent at home, only outside the South."

She laughed and asked, "Are you from the Tidewater?"

Recounting the conversation later back home in Georgia, my wise-acre college junior son offered that my accent was more "Okefenokee that Tidewater." He did not mean it as a compliment.

My ancestors were some of those early English settlers in the Tidewater region of Virginia, but restless as they were, moved South and West long ago. To the Michigan ear, I suppose one Southern accent sounds like another. To Southerners, however, "swampers" and "hillbillies" are akin and are NOT an accent with which one wishes to speak.

The accents differ, but the issues facing school districts are very similar. Both Georgia and Michigan have a mixture of large, urban districts (Detroit and the metro Atlanta area) and rural districts. In both states, the large, urban districts get the lion's share of attention (and funding). Rural school districts are struggling all across America. Our politicians are neglecting rural students this neglect is not benign, it will remand generations to poverty. While none of our leaders have verbalized any ill intentions, their actions have consistently articulated, "These children don't matter."

They do matter. Their children matter and their grandchildren matter. Yet we are inexplicably following a course that will create modern day Snopes, Benseys, and Waldens. (Those are "white trash" Southerners, appearing in Erskine Caldwell's Tobacco Road) We can do better- and we must.

The boundaries of one or our most neglected regions have changed over the years. It's the Wiregrass Region, and early on it referred to nearly all of southern Georgia, much of southeastern Alabama, and the Florida Panhandle. Some today consider it to be just a handful of counties in the extreme southern part of our state, plus a few in Alabama and Florida. Boundary lines that will satisfy most begin just below Macon, Georgia, follow the Fall Line west to Montgomery, Alabama, turn south toward the Panhandle, then east towards Lake City, Florida. There the boundary turns north, running in the general vicinity of the Suwannee River and western edge of the Okefenokee Swamp. At an imprecise point above the Okefenokee, the boundary bends to the northwest and heads back towards Macon.

The region contains no major cities, but significant population centers include Dothan, Enterprise, and Troy in Alabama; Albany, Americus, Thomasville, Tifton, Valdosta, and Vidalia in Georgia; and Marianna and Tallahassee in Florida. All - and everything in between - suffer extremely high poverty rates. Today, as in much of Georgia's history, the Wiregrass Region is arguably a place of relative isolation which lacks economic opportunities, especially when compared to "the other Georgia" - Metro Atlanta and the northern counties.

Aristida stricta, the native tall grass than has for eons given cover to rattlesnakes and quail, now shields underserved children from the view of Atlanta's politicians. Their relative invisibility makes these children vulnerable and easy to ignore. Even in the unlikely event that all their parents, grandparents, and other relatives turned out on Election Day, their representation can't approach that of a typical child from North Georgia. So like a regressive or fixed tax which is more burdensome to the poor, Georgia's "austerity reductions" continue to hurt rural systems far more than their affluent counterparts in northern Georgia. And no one cares.

Perhaps we should form non-profits and air commercials like other third-world areas? With pictures of sweet, big-eyed children and captions that read "For just a dollar a day, you can help a Wiregrass Child" or "Order a Grande instead of a Venti this morning and use the difference to help educate a child from the Wiregrass Region." I guarantee we'd have better luck than approaching the politicians. With increasing impunity as they've gotten away with it, they have systematically shifted much of the state's constitutional obligation to educate its student to the local taxpayer. They've turned a deaf ear to constituents and ignored the plight of Georgia's most vulnerable citizens.

Never before have I viewed my state as cruel or unfeeling, but I'm at a loss for any other explanation. How else can we explain deliberate neglect - especially when the consequences of such neglect are more profound than they've ever been? Our actions (or inactions) today will result in profound consequences in the future.

Similar situations exist across our nation. Whether our students speak Tidewater, Okefenokee, Yat, Boontling, Appalachian English, Florida Cracker, Wawarsing, Yooper, or any other of the dozens of regional dialects, funding for public education has reached a crisis point. We should speak with one voice - with one marvelous blend of dialects - and demand our politician satisfy their moral and constitutional obligations to educate our children.

Gary Lister can be reached at dixiemuse@gmail.com

A comparative view on goods and services tax (GST)

This comparison is based on the recommendations of the First Discussion Paper produced by the Empowered committee of states finance ministers (hereafter referred as EC) and the Report of the Task Force on GST constituted by the Thirteenth Finance commission.

 

Before going on discussion we should define GST and the Objective behind it.

 

What is GST?

 

GST is a tax on goods and services with comprehensive and continuous chain of set-off benefits from the Producer's point and Service provider's point upto the retailer level. It is essentially a tax only on value addition at each stage and a supplier at each stage is permitted to set-off through a tax credit mechanism.
Under GST structure, all different stages of production and distribution can be interpreted as a mere tax pass through and the tax essentially sticks on final consumption within the taxing jurisdiction.

 

Objective behind GST

 

a) The incidence of tax only falls on domestic consumption.

b) The efficiency and equity of the system is optimized.

c) There should be no export of taxes across taxing jurisdictions.

d) The Indian market should be integrated into a single common market.

e) It enhances the cause of co-operative federalism.

 

Our comparative discussion will be based only on significant points constructing overall GST.

 

GST MODEL

 

A dual structure has been recommended by the EC. The two components are: Central GST (CGST) to be imposed by the center and state GST (SGST) by the states.

 

The Task Force has also recommended for the dual levy imposed concurrently by the centre and the states, but independently to promote co-operative federalism. Both the CGST and SGST should be levied on a common and identical base.

 

Both have suggested for consumption type GST, that is, there should be no distinction between raw materials and capital goods in allowing input tax credit. The tax base should comprehensively extend over all goods and services upto final consumption point.

 

Also both are of the view that the GST should be structured on the destination principle. According to Task Force this will result in the shift from production to consumption whereby imports will be liable to both CGST and SGST and exports should be relieved of the burden of goods and services tax by zero rating. Consequently, revenues will accrue to the state in which the consumption takes place or is deemed to take place.

 

The Task Force on GST said the computation of CGST and SGST liability should be based on the Invoice credit method. i.e., allow credit for tax paid on all intermediate goods and services on the basis of invoices issued by the supplier. As a result, all different stages of production and distribution can be interpreted as a mere tax pass-through and the tax will effectively ‘stick' on final consumption within the taxing jurisdiction. This will facilitate elimination of the cascading effect at various stages of production and distribution.

 

Treatment of Central GST and State GST

 

Both the EC and the Task Force on GST have recommended treating the Central GST and the State GST separately. The CGST and SGST should be credited to the accounts of the centre and the states separately. Taxes paid against the CGST should be allowed to be taken as input tax credit (ITC) for the CGST and could be utilized only against the payment of CGST. The same principle will be applicable to the SGST. Cross utilization of ITC between CGST and the SGST should not be allowed.

 

While the Task Force on GST insisted that the full and immediate input credit should be allowed for tax paid (both CGST and SGST) on all purchases of capital goods (including GST on capital goods) in the year in which the capital goods are acquired. Similarly, any kind of transfer of the capital goods at a later stage should also attract GST liability like all other goods and services.

 

Exemption from GST

 

The EC favoured the imposition of GST to be based on ‘negative list' and for few exemptions if necessary but didn't provide any list of exemption. However, the Task Force also said that there shouldn't be any exemption from CGST and SGST but if for some reason, it is considered necessary to provide exemption, the centre and states should draw a common exemption which should be restricted to the following: 

 

a. All public services of Government (Central, state and municipal/ panchayati raj) including civil-administration, health services and formal education services provided by Govt. schools and colleges, Defence, Para-military, Police, Intelligence and Government Departments. Public services will not include the following:

 

1) Railways;

2) Post and Telegraph;

3) Other commercial departments;

4) Public sector Enterprises;

5) Banks and Insurance;

6) Health and Education services.

 

b) Any service transactions between an employer and employee either as a service provider, recipient or vice versa.

c) Any unprocessed food article which is covered under the public distribution system should be exempt regardless of the outlet through which it is sold;

d) Education services provided by non-Governmental schools and colleges; and

e) Health services provided by non-Governmental agencies.

 

Tax on SIN goods (Emission fuels, tobacco products and alcohol)

 

According to EC alcoholic beverages should be kept out of GST. Also crude oil, diesel, petrol and ATF will not attract GST but the states will be free to levy taxes on them. While Tobacco Products will be subjected to GST with input tax credit (ITC).

 

The Task Force on GST has recommended that the SIN-goods comprising of emission fuels, tobacco products and alcohol should be subject to a dual levy of GST and excise. No input credit should be allowed for excise. However, industrial fuels should be subjected only to GST (both central and state) with the benefit of input credit like any other intermediate good.

 

Check-Post

 

The EC has not clarified anything about check-post whereas the Task Force on GST has come out with something new in this area. According to it the function of all state border check-posts should be reduced to checking contrabands by setting up ‘Large scanners' for trucks to pass through without any need for physical verification. The cost of the scanners should be entirely borne by the central government. All check-posts should be jointly manned by both states so as to reduce the number of check-posts and enhance efficiency in the road movement of goods.

 

Inter-State transactions

 

The EC has suggested for adoption of ‘IGST Model' for taxation of inter-State transaction of Goods and Services. The scope of IGST Model is that centre would levy IGST which would be CGST plus SGST on all inter-State transactions of taxable goods and services with appropriate provision for consignment or stock transfer of goods and services.The Task Force on GST is of the view that all inter-State transactions in goods and services should be effectively zero rated by adopting the Modified Bank Model. (We are not going into the details here.)

 

Consignment Sales and Branch transfers across States

 

The EC has not yet provided any provision regarding the consignment sales and branch transfers across States.

 

The Task Force on GST has said that the consignment sales and branch transfers across States should be subject to treatment in the same manner as if it was an inter-State transaction in the nature of sale between two independent dealers.

 

Threshold Limit for Goods and Services

 

The EC has recommended for uniform threshold of annual gross turnover of Rs.10 lakh for all goods and services for SGST applicable for all states and Union Territories . Below this threshold limit, State GST is not applicable. The threshold limit for central GST may be kept at Rs.1.5 crore for goods and central GST may be kept at higher levels for services.

 

Keeping in view the compliance cost and administrative feasibility, the Task Force on GST proposed that the small dealers (including service providers) and manufacturers should be exempted from the purview of both CGST and SGST, if their annual turnover (excluding both CGST and SGST) does not exceed Rs.10 lakh. However, like in most other countries, those below the threshold limit may be allowed to be registered voluntarily to facilitate sales to other registered manufacturer/dealers, limit competitive distortions and avoid inequalities. Further, the threshold exemption limit should be uniform for both CGST and SGST and across states.

 

Composition/Compounding scheme

 

The EC is of the view that composition / compounding scheme for the purpose of GST should have an upper ceiling on gross annual turnover and a floor rate with respect to gross annual turnover. In particular there would be a compounding cut-off at Rs.50 lakh of gross annual turnover and a floor rate of 0.5% across the states. The scheme would also allow option for GST registration for dealers with turnover below the compounding cut-off.

 

The Task Force on GST with a view to reduce administrative and compliance burden, suggested that small dealers with annual aggregate turnover of goods and services between 10 lakh to 40 lakh may be allowed to opt for a Compounded levy of One percent, each towards CGST and SGST. However, no input credit should be allowed against the compounded levy or purchases made from exempt dealers.

 

GST on Precious Metals

 

A provision of special rate for precious metals has been recommended by the EC. While the Task Force on GST is of the view that certain high value goods comprising of gold, silver, platinum ornaments, precious stones and bullions are prone to smuggling due to high tax incidence thereby generating negative externalities in terms of social and economic disorder. So, the Task Force recommended that dealers in such high value items, may subject to the threshold exemption but without the ceiling of Rs.40 lakh, also be allowed to opt the compounded levy of one percent, each towards CGST and SGST.

 

Special Industrial Area Scheme

 

The EC has suggested that the tax exemption, remission etc. related to industrial incentive should be converted , if at all needed , into cash refund schemes after collection of tax , so that GST Scheme on the basis of a continuous chain of set-off is not disturbed. Regarding Special Industrial Area Schemes, it is clarified that such exemptions, remissions etc. would continue upto legitimate expiry time both for the centre and the states. Any new exemption, remission etc. or continuation of earlier exemption, remission etc. would not be allowed. In such cases, the central and the state Governments could provide reimbursement after collecting GST.

 

The Task Force on GST recommended that in case it is considered necessary to provide support to industry for balanced regional development, it would be appropriate to provide direct investment linked cash subsidy, while the area based exemption in respect of CENVAT should not be continued under the GST framework.

 

Taxes to be subsumed under GST

 

Both the EC and the Task Force on GST have got same view regarding taxes to be subsumed under CGST whereas they differ on SGST.

 

The following central taxes should be subsumed in the CGST:

 

a) Central Excise Duty (including Additional Excise Duty)

b) Service tax

c) Additional Customs Duty (commonly referred as ‘CVD')d) Surcharges and all cesses.

 

The following state taxes should be subsumed in the SGST.

 

a) VAT / Sales tax (including CST)

b) Entertainment tax (other than levied by local bodies)

c) Entry tax no in lieu of Octroi

d) Other Taxes and Duties (includes Luxury tax, Taxes on lottery, betting and gambling, and all cesses and surcharges by states).

 

The Task Force has recommended for the subsumation of following other taxes levied by the states on goods and services:

 

a) Stamp duty

b) Taxes on vehicles

c) Taxes on Goods and Passengers

d) Taxes on duties on electricity.

 

It has also suggested that all entry and Octroi duties levied by the third-tier government should be abolished.

 

GST Rate Structure

 

The EC has decided to adopt a two rate structure- a lower rate for necessary items and goods of basic importance and a standard rate for goods in general. There will be also a special rate for precious metals and list of exempted items. They haven't prescribed the exact value of the SGST and CGST rates including the rate for services.

 

The Task Force has provided a clear rate structure for GST. According to it the rate of CGST and SGST on all non-SIN goods and services should be fixed at a single positive rate of 5% and 7% respectively. In addition, there should be a zero rate, applicable to all goods and services exported out of the country.

 

GST and SEZ

 

The EC is of the view that Exports would be zero-rated. Similar benefits may be given to Special Economic Zone (SEZs). However, such benefits will only be allowed to the processing zones of the SEZs. No benefit to the sales from an SEZ to Domestic Tariff Area (DTA) will be allowed. However, similar is the view of the Task Force on Exports but they are not in the favour of any exemption for the developers of, or units in, the Special Economic Zone.

 

Tax Administration

 

According to the EC the administration of GST shall be divided into states and centre with a proposition to have uniform compliance procedures across states under the respective laws.

 

The Task Force on GST has produced a clear cut picture regarding tax administration.

 

The CBEC shall be responsible for implementing the CGST and the state tax administrations will be separately responsible for implementing the SGST. The various tax administrative functions such as assessment, enforcement, scrutiny, and audit should be undertaken by the CBEC in respect of CGST and by the state tax administration in respect of the SGST, subject to recommendation on Small Scale Industries.

 

All compliance and enforcement procedures under CGST and SGST should be uniform (from taxpayer perspective).

 

The central government should establish a common IT infrastructure which will serve the needs of both CGST and SGST.

 

The jurisdiction between the CBEC and the state administration may be divided between the two in such manner that the interface of the taxpayer is confined to one tax administration only. The basis of division could be turnover or any other criteria which is considered reasonable so that the compliance and administrative burden is minimized.

 

All persons with annual aggregate turnover of goods and services exceeding Rs.10 lakh (excluding CGST and SGST) should be required to register and obtain a GST registration number. Person with lower turnover may be allowed an option to register.

 

The unit of taxation for the purpose of GST should be persons as defined under the Income Tax ACT.

 

For the purpose of CGST, all production units/ branches of a person located anywhere in the country will be treated as a single taxable entity eligible for CGST input credit across units /branches. Whereas, for the purpose of SGST ,all production units / branches of a person located anywhere within the state will be treated as a single taxable entity eligible for SGST input credit across units/ branches in that state.

 

Also the Task Force has suggested that the payment of tax and the transaction reporting should be made through a combined payment and transaction reporting statement in Form no. GST-1. This statement should detail all business to business transactions relating to sales. This statement should be common for both CGST and SGST compliance and it should be mandatory to file this statement electronically on a monthly basis while making payment of taxes. The VAT period should be a calendar month.

 

We have provided you a cursory view on different issues related to GST without going into the details of them. We will try to give you detailed discussions in our further updated papers on GST.

 

 

 

LAWCRUX TEAM

 

Import export trade, Custom duty, Central excise duty, GST, Indirect tax services, indirect tax, advance license, foreign trade policy, tax planning, e-book, EOU, SEZ, NEPZ, EPCG, DFRC, CBCC, DGFT, DEPB

http://www.lawcrux.com

 

 

 

Author: Nagesh Bajaj

LawCrux Advisors (P) Ltd.

Law House

About the Author

Lawcrux is a body corporate registered under the Companies Act, 1956. It is a team of Chartered Accountant, Company Secretaries, Advocate and Retired Government Officials. For More Information visit: http://www.lawcrux.com or contact us on our email id: nbajaj@lawcrux.com, phone No: +91.1294086390.

 

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