Goods and Service Tax (GST) and exemption do not go well together, Mr Arbind Modi, Chairman of the Task Force Report on GST, has said. Addressing a symposium on GST here on Wednesday, he said exemptions that were given at the last point of value addition would defeat the very purpose of value added tax. However, the Task Force had recommended exemptions for primary food items, health and education services, keeping in mind the equity issues in the country. “We, however, have flagged (raised) the issues, while recommending these,” he said. The symposium was organised by the Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI). Mr Modi said he favoured a single rate tax structure as against the two-rate structure. Talking on the pitfalls of the two-rate structure, he said the effective tax burden was too high in the higher rate. “It, in fact, is a big incentive for evasion,” he said. “Let us have a moderate rate. This will enhance compliance,” he observed. On the urgency of moving to the GST regime, he said the WTO regime would not allow any restrictive trade practices. “Every WTO incompatible norm is being dragged to relevant courts and is being turned down,” he said. Moreover, countries had been trying to capture the Indian market as they emerged from recession. “As countries emerge out of recession, they are more eager to capture the Indian market. As we are integrated to free trade markets and allow free movement of goods and services, Indian industry stands exposed (if we fail to switch to GST),” he said.
