"GST Has En­tered A Smooth Phase": Has­mukh Ad­hia, Union Fi­nance Sec­re­tary

HAS­MUKH AD­HIA, Union Fi­nance Sec­re­tary

India Business Journal - - CONTENTS - JOYEETA DEY

It is a year since the roll­out of the Goods and Ser­vices Tax (GST). Af­ter ini­tial glitches, the in­dus­try and busi­nesses seem to have come to grips with the progressive tax sys­tem. There are, of course, some is­sues with the GST, which the gov­ern­ment and the GST Council, the supreme, de­ci­sion-mak­ing author­ity of the indi­rect tax regime, are ad­dress­ing.

The GST has en­tered a "smooth phase" within a year of its roll­out. With "pretty good" tax com­pli­ance, the ef­forts will now be to sim­plify tax re­turn forms, dis­closes Union Fi­nance Sec­re­tary Has­mukh Ad­hia. Mr Ad­hia views are taken se­ri­ously be­cause he has been one of the lead­ing bu­reau­crats to over­see the NDA gov­ern­ment's two ma­jor ini­tia­tives - de­mon­eti­sa­tion and GST. A blue-eyed boy of Prime Min­is­ter Naren­dra Modi, the 59-year-old IAS of­fi­cer of the Gu­jarat cadre had spear­headed the re­mon­eti­sa­tion drive quite ef­fi­ciently. Mr Ad­hia was one of the top ex­ec­u­tives who had worked be­hind the scenes in get­ting the long-stalled GST to be­come a re­al­ity in July last year.

Born in Wankaner in Gu­jarat's Ra­jkot dis­trict, Mr Ad­hia had done his MCom from Gu­jarat Univer­sity, fol­lowed by a di­ploma in pub­lic pol­icy and man­age­ment from IIM-Ban­ga­lore. He also has a PhD in Yoga from Swami Vivekananda Yoga Univer­sity in Ben­galuru. Mr Ad­hia was prin­ci­pal sec­re­tary to Mr Modi, when he was the chief min­is­ter of Gu­jarat. Later, the top bu­reau­crat was moved to New Delhi - when Mr Modi be­came the prime min­is­ter in 2014 - and was ap­pointed Union fi­nan­cial ser­vices sec­re­tary. In a wide-rang­ing in­ter­view, Mr Ad­hia, one of the top bu­reau­crats who put GST into oper­a­tion, throws light on the new de­vel­op­ments tak­ing place in the indi­rect tax regime. A year later, what are the ma­jor gains that the GST has brought about?

There are quite a few gains. The GST has re­sulted in re­duc­tion of mul­ti­ple taxes, re­moval of cas­cad­ing ef­fect of tax­a­tion, re­moval of State check- posts, end- to- end elec­tronic fil­ing, ex­pan­sion of the tax­payer base and lesser pos­si­bil­ity of tax eva­sion.

Would you say that ini­tial pains as­so­ci­ated with im­ple­men­ta­tion of the GST is over?

Of course, yes. For any new sys­tem, there will al­ways be ini­tial glitches. I don't think that we can use the word pain, and these glitches are also mainly on ac­count of a lack of in­for­ma­tion. So, the mo­ment the in­for­ma­tion gap was re­moved, peo­ple felt more com­fort­able. I think all the glitches are over, and we are in a smooth phase of im­ple­men­ta­tion.

What is the un­fin­ished agenda of the first year of GST?

This year's main agenda will be to im­ple­ment a new and sim­ple sys­tem of fil­ing of re­turns.

The de­sign for sim­pli­fied re­turn form has been ap­proved by the GST Council in May. Would you elab­o­rate on how the form would be?

The one-page re­turn will be modular in na­ture. So, if you are a B2C (busi­ness-to-con­sumer) dealer, then many of the sec­tions will not open at all for you. If you are a B2C dealer, then only one form will open, and it will have a small ta­ble. It will be user friendly. The same re­turn will have two sec­tions. One will be on your tax li­a­bil­ity and in­put tax credit (ITC) that is be­ing claimed. The sec­ond sec­tion is for B2B (busi­ness-to-busi­ness) deal­ers who have to file in­voice-wise de­tails in a tab­u­lar form. B2C deal­ers have to file only ITC claims and pay taxes.

Crit­ics of the GST note that for­mal­i­sa­tion of econ­omy has not been achieved the way it was in­tended to.

In fact, data on GST con­tra­dicts what crit­ics of the new tax are say­ing.

"Dur­ing the pre-GST pe­riod, there were about 60 to 65 lakh peo­ple who mi­grated

to the new tax sys­tem, and the re­main­ing (48 lakh)

are all new reg­is­trants. So, these many new deal­ers have come into the

tax net. If it is not for­mal­i­sa­tion, then

what is it?"

Dur­ing the pre-GST pe­riod, there were about 60 to 65 lakh peo­ple who mi­grated to the new tax sys­tem, and the re­main­ing (48 lakh) are all new reg­is­trants. So, these many new deal­ers have come into the tax net, and per­cent­age-wise, the fig­ure is quite high. If it is not for­mal­i­sa­tion, then what is it?

But then com­pli­ance is not get­ting re­flected in monthly re­turns filed.

Com­pli­ance is pretty good. There is only a de­lay in com­pli­ance. For July 2017, out of the peo­ple who were sup­posed to file 3B, 93.63 per cent have al­ready filed over a pe­riod of time. But if you take March 2018, 79 per cent had filed 3B re­turns. Com­pli­ance in Au­gust was 94 per cent, Septem­ber 92 per cent, Oc­to­ber 89 per cent, Novem­ber 86 per cent, De­cem­ber 85 per cent, Jan­uary 83 per cent and Fe­bru­ary 81 per cent. You can see that the com­pli­ance level keeps on in­creas­ing with a time lag. Over a pe­riod of time, the com­pli­ance level will go up to 96 per cent and above. More­over, there is no penalty or very lit­tle penalty to­day as about 25 per cent of re­turn fil­ers have zero trans­ac­tion.

"This year's main agenda will be to im­ple­ment a new and sim­ple sys­tem of fil­ing of re­turns. The one-page re­turn

will be modular in na­ture."

With con­tra­dic­tory ver­dicts passed by the Author­ity for Ad­vance Rul­ings (AAR) in dif­fer­ent States, what is the way for­ward?

This is un­der dis­cus­sion in var­i­ous com­mit­tees of of­fi­cers. Ad­vance rul­ing ap­plies in in­di­vid­ual cases. It does not ap­ply to all. And in a par­tic­u­lar cir­cum­stance, it ap­plies to a par­tic­u­lar case. But it may so hap­pen that one party it­self hav­ing mul­ti­ple State op­er­a­tions can go to dif­fer­ent States and get dif­fer­ent ver­dicts. So, for that, one way out could be to have a cen­tralised ap­pel­late author­ity rather than a cen­tralised ad­vance rul­ing author­ity. There can be an ap­pel­late author­ity on top of the ad­vance rul­ing author­ity. So, if there are two dif­fer­ing view­points given by two dif­fer­ent AARs in two dif­fer­ent States in re­spect of the same cir­cum­stances, then it can come to the ap­pel­late author­ity. This is un­der dis­cus­sion. We will see if it is to be done. Once the GST Council de­cides, we will make it a part of the leg­isla­tive amend­ments.

What are the amend­ments to the GST law that are on the anvil?

These amend­ments have al­ready been ap­proved in the Jan­uary meet­ing of the GST Council. Broadly, the amend­ments are for tax­payer fa­cil­i­ta­tion and for re­mov­ing dif­fi­cul­ties and glitches in fil­ing re­turns. Small prob­lems in draft­ing that have been iden­ti­fied will be re­moved, and this will help tax­pay­ers.

Has the Cen­tre made any con­crete pro­posal to the GST Council to bring petrol and diesel un­der the GST?

We are con­scious of the fact that there are cer­tain pe­tro­leum items which are not a part of the GST. As and when there is a dis­cus­sion on these items in the GST Council, the council will take a call on it.

Will the GST Council start dis­cus­sion on petro-prod­ucts, be­gin­ning with nat­u­ral gas, which is seen as a low-hanging fruit?

It de­pends on what the GST Council wants to dis­cuss. But yes, among the five items, the two nat­u­ral can­di­dates for the first level of dis­cus­sion would be nat­u­ral gas and avi­a­tion tur­bine fuel. The GST Council can de­cide what it wants to dis­cuss, but these two are eas­ier.

How soon do we see the process of con­vert­ing the GST Net­work (GSTN) into a pub­lic com­pany get­ting com­plete?

We will take it to the Cab­i­net soon. It will hap­pen this year. The GSTN chair­man will con­tinue. As far as staff ar­range­ment is con­cerned, the present dis­pen­sa­tion will con­tinue for five years.

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