The TFC chairman also suggested that activities such as housing, construction and railways be included in GST to increase the tax base and enhance collections. “I would urge that the construction and housing sectors be included in the GST tax base, either immediately or during a subsequent phase,” he said. The reason for this is that the construction sector is a significant contributor to the national economy and housing expenditure dominates personal consumption expenditure.

Kelkar also made a case suggesting that the rail sector could be included under the GST umbrella to bring about significant tax gains and widen the tax net so as to keep the overall GST rate low. The inclusion of the rail sector in the tax regime which will do away with most of the indirect taxes should be done if the government wants to provide a level playing field to road and air transportation sector. This will have the added benefit of ensuring that all inter-state transportation of goods can be tracked through the proposed information technology (IT) network, Kelkar said.

The chairman also suggested incentives for states that co-operate and co-ordinate to streamline the procedure for implementing GST on the ground. He cited the case of check posts, which could be combined by two states on their borders to monitor outgoing and incoming goods.

“It may be difficult to eliminate check posts given the concerns of state governments which may extend beyond collection of taxes and movement of goods to vehicle fitness examination, prevention of trafficking, collection of local cesses, etc. The Finance Commission is prepared to support creation of such check posts if the respective state governments are willing to operate jointly,” Kelkar said.

... contd.