‘GST has been one of the major tax reforms in the history of independent India...it’s a win-win situation for everyone’
The Goods and Services Tax (GST) Council may eventually rationalise tax rates into fewer slabs in such a manner that items in the higher slab move into lower ones and certain goods and services enjoying lower rates shift to a higher slab. In an interview with Shishir Gupta and Rajeev Jayaswal of Hindustan Times, revenue secretary Ajay Bhushan Pandey said the exercise will take place after GST revenues stabilize at comfortable levels. Edited excerpts:
GST was introduced as a “good and simple tax”, but it is still perceived to be a complicated system. Why? How do you make it really good and simple?
GST has been one of the major tax reforms in the history of independent India which subsumed 17 different taxes and multiple cesses that were levied by different states. GST was a win-win situation for everyone — the governments [the Centre and states], the businesses and the consumers. In the GST regime, incidence of tax on all commodities came down. Lots of items were exempted under GST that were earlier being taxed in the pre-gst regime. There were many items that faced incidence of multiple taxes — value added tax, excise, service tax, Octroi, etc. All these got subsumed and the incidence of tax on each item was significantly less. GST abolished Octroi, entry tax, gate pass, check posts, and above all the inspector raj.
Despite such lesser tax rates in comparison to pregst days, the tax revenue of states increased under GST so much so that during the last two years, 20 states showed a growth more than 14%... During this year, we had GST collection of above ~1 lakh crore in each of the months of April, May and July. If GST had some inherent problems then what explains the good revenue growth in the first two years of its existence. Though the final figures for November collection would be coming tomorrow, I am confident that this month also we would cross the collection mark of ~1 lakh crore.
As far as the alleged complexities are concerned, it has two dimensions. One, it is a new, budding tax system where people are yet to get acquainted with – so there are behavioural and adaptation issues, which would settle down soon -- and the second is that being a new system it cannot be a rigid one. We are using technology to further simplify and effect the ease of doing business with ease of living. We are open, accountable and responsive to the issues, feedbacks, nuances, challenges that will keep coming in the initial few years. Also, 80-90 lakh returns are being filed every month on the GST portal, some 20 lakh returns were filed on the last due date. Had there been any innate problem with the system’s architecture, it would not have been possible to file returns in such huge numbers.
GST collection in last two months was very poor. Is it because the deceleration in the economy is reflected in the fall in the revenue collections?
GST is a tax on consumption so it will closely follow GDP growth, there is no denying {it}. GDP figures released yesterday show that the nominal GDP growth in the first half of 2019-20 is 7%. While the GST growth during this period has been 5%, it is important to note that the growth on GST in domestic transactions is 8%. As the economy revives, GST revenue growth will also improve. Trends show that November is better than the last two months. This may be an early sign of recovery.
The GST collections in last few months have been less than anticipated. Certain sectors like auto and real estate have seen a temporary slowdown of cyclical nature. This also impacts certain core sectors like metals, cement and plastics. Besides this, imports have seen compression in the last few months. However, November domestic numbers are quite encouraging. I am confident that the GST revenue collection would move above Rs. 1 lakh crore. A number of measures have been taken recently to improve compliance and certain significant measures are in the pipeline. The GST collection growth here onwards should be northwards on improved compliance and economic growth.
Several states have pointed to large scale of Gst-related frauds, a major drag on the exchequer. How will you plug the loopholes?
A number of initiatives have been planned for plugging GST loopholes. It has been observed that one of the key challenges that we were facing was fly-by-night registrations since there was a provision of deemed registration within three days of application of registration. We are now introducing Aadhaarbased registration from 1st of January 2020.
There are three major reforms already in advanced stage of implementation that will make such frauds extremely difficult. The first is the new return which is due for roll-out from April 2020. This system is already available on the GST portal on a trial basis and thousands of taxpayers have already tried it. Based on their feedback, already two rounds of improvements have been carried out. On 7th December, we have planned country-wide consultations to take feedback on the new return. The second is e-invoice...the third is cash rewards and printing of DQR [dynamic QR ] code on B2C {business-to-consumer} invoices. To incentivise billseeking behaviour, there is a plan to put in a place where customers can upload their invoices and certain invoices will be selected randomly for a cash reward.
Is a simple GST regime —with one or two rates besides zero duty items for the poor — a reality? How and when?
It is a moot point if a singlerate GST is desirable in India. Today, there are four rates and {the GST} Council is aware of the fact that at some point of time, the merger of a few slabs will be required, perhaps a system with a standard rate with most of goods and services, a merit rate with items of mass consumption and a demerit rate for luxury and sin goods.
Also, you see, the GST Council has reviewed the rates in a number of its meetings and has suggested revisions in the GST rates on around 400 commodities and 77 categories of services since July 2017. These rate rationalizations have reduced the cost to the consumers, thus increasing the purchasing capacity/consumption.
GST rates are continuously reviewed by the GST Council, taking into account all relevant factors such as the consumer segment, supplier segment, stakeholder demand, revenue trends etc. As revenues stabilize at comfortable levels, the Council may review {the system} to rationalize the rates into fewer slabs.