‘Frequent recalibration of tax rates strengthens GST’s spirit’

‘Council never intended to put too much compliance burden on SMEs’

GUWAHATI: Seeking to alter perception that the goods and services tax (GST) had led to a higher tax on some items and heeding complaints by businesses that the new indirect tax regime had heightened their compliance burden, the GST Council offered concessions to the tune of ₹20,000 crore at the 23rd meeting of the federal tax body in Guwahati on Friday.

Frequent changes in tax rules and rates as well as the continuation of some pre-GST era schemes for exporters have sparked criticism that the new regime is yet to settle down and that its objective of simplifying indirect taxation and making it transparent hasn’t been met.

Himanta Biswa Sarma, finance minister of Assam, which hosted the latest GST meeting, however, said frequent recalibration of the tax system only strengthens it. Edited excerpts from an interview:

At every council meeting, there are changes in rules and tax rates. What went wrong with the original design and fitment of items into various tax slabs?

It is expected that a major tax reform such as GST will take time to settle down. We, as a nation, have decided to opt for a unified tax across the country.

GST is a combined tax subsuming Union and state taxes. In deciding the unified GST rate on particular supplies of goods and services, there are several considerations to be taken into account.

On all the implementation challenges, we need to find practical solutions step-bystep. It is not possible to design a foolproof GST that needs no council to monitor implementation on the ground. The council takes note of how the new tax regime is evolving and as revenue stabilises, we will continue to reduce tax rates. Experts have pointed out that the council is engaged in kneejerk reactions to a hue and cry from businesses and traders, which kills the spirit of the GST and undermines the benefits to be realised from the tax reform. Your comments? There can be criticism anyways. One can criticise well-intended decisions to be kneejerk reactions and studied restraint to being non-responsive. The council works in its own ways and at its own pace irrespective of the noises outside. We take pragmatic decisions considering the revenue, implications to businesses and future growth of the economy on the basis of the data placed before the council. I believe the changes made in rules and rates only strengthen the spirit of GST. It has never been the intent of the council to put too much compliance burden on small and medium enterprises.

What has been Assam’s experience with GST implementation? Is there a revenue loss?

In the first few months, we did not do well. In October, we came significantly closer to the tax collection that we had prior to GST but did not get the 14% increase envisaged in the new regime.

(As per the formula for Union government to compensate states’ losses in the GST regime, state revenues are projected to grow 14% annually. Any shortfall from this level is made good by the centre). We legitimately believe that in the next three-four months, we will meet the set target.

What are the challenges that northeastern states face in the GST regime? As an oilproducing state, does Assam face any difficulty?

Our oil and gas industry is facing some problems because select hydrocarbons—crude oil, petrol, diesel, jet fuel and natural gas—are not part of GST, while the services and the equipment used in their business attract GST. Not getting rebates for the taxes paid on such services and equipment used is a problem that they face. At the same time, if you bring these items into GST, you may have to impose a heavy cess on them. (The burden of central and state taxes on auto fuel overshoots the highest slab of 28%. For example, it comes to 49% in the case of retail price of petrol charged in New Delhi as of November 9, according to details available from Hindustan Petroleum Corp. Ltd) However, this is an issue that the council will take a look at, probably next year. GST being a new tax system, I will refrain from assessing it before we complete one full year.

Will there be further rationalisation of tax rates?

That has been the idea. But it depends on revenue. The 23rd meeting of the council has been path-breaking. We have taken many decisions in favour of businesses in general and specifically for traders, smallscale industry and the people.