Financial services industry deserves a better gst

Financial services industry deserves a better gst

The financial services industry must be spared a compliance (अनुपालन/सम्मति) nightmare when the goods and services tax (GST) is rolled out. The industry is happy to pay whatever tax is due but would like the Centre and the states to sort out how to share the proceeds amongst themselves without making service providers jump through hoops to facilitate (सुगम बनाना) that division. Most financial services span (विस्तारित होना) multiple states and extensively use computer networks and servers, whose location at a particular site has no real bearing on where, and from where, a service using those networks is rendered (प्रदान या प्रस्तुत की गई है) . The sensible (समझदार भरी / बुद्धिमानी भरी) thing to do would be to treat all financial services as inter-state transactions to be taxed under Integrated GST, with all vendors (व्यापारी / विक्रयी) to financial services also being taxed under IGST, so as to avoid accumulation of input tax credits that cannot be availed (लाभ उठाना/ उपयोगी होना) of.

Absurdly, the model law treats securities as goods. Taxing securities transactions on the value of securities would kill trading in securities and cripple (बिगाड़ना / खराब करना) the role of the capital markets in allocating capital to different alternative uses and hedging (वित्तीय हानि से बचाव हेतु वायदा) risk. A bond or a share is a unit of capital with particular characteristics including risk and return associated with it. It is an input to value addition, not value addition in itself. No value-added tax should apply to capital, per se. The process of matching suppliers of capital with those looking for it is indeed a service that should be and is taxed. The government must amend the model law to remove the anomaly (नियमहीनता/विसंगति) of treating financial services as goods.

The GST Council must see reason on the matter. The model law also proposes to tax intra-firm supplies of services without any payment attached to the service. The tax on intra-firm cross-border supply of services will lead to complex valuation challenges and possible transfer pricing disputes, and prove a compliance nightmare that yields little tax. It should be scrapped (ख़त्म कर देना) . The limited time available to configure complex IT systems to comply with the tax is the other challenge. Australia gave companies a clear 12 months to comply with the tax after the rules were finalized and made public.