Has the tax settled in?
GST has settled down much faster than expected. Other countries who visited us also felt surprised that GST settled down in one year. There are countries that introduced GST on July 1, 2015, and now are rolling it back. We are very content and satisfied that GST implementation has been very smooth.
What would you count as key successes and what remains to be done?
The first key success is that we managed to remove multiplicity of taxes. We removed the cascading and we increased the tax base. There are 45-50 lakh new tax payers who have come into the tax net. We have been able to have a reasonably good robust growth rate in indirect taxes as compared to pre-GST period. As per one estimate made by the chief economic adviser, 13% growth rate post-GST compared to pre-GST. One of the major success of our GST implementation is that there has not been any inflation. In most other countries, inflation was always a matter of worry. Whatever people may say about our four-slab structure, people don’t like it, but it has helped us in containing inflation.
Some key items remaining are invoice-to-invoice matching, return filing, reverse charge mechanism…
One single item which remains on the agenda is implementation of a single simplified return form. Return should be so simple that people would accept it readily and it would give the information required for invoice matching. Once that happens, tax evasion would become absolutely impossible. This is the key agenda item. Reverse charge is a small item.You may be thinking there is lull in GST because there is a gap between last GST Council and the next one. This is not so. The officers’ committee is meeting almost every week. Behind the scenes, the work officers are putting in people have no idea.
How soon do we expect simplified filing?
We have already said six months.
The number of items in the 28% slab has been slashed. The government had said more items will be moved when GST stabilises. I don’t think we have still reached a stage where we are in surplus. In fact, our main worry is that we should be able to give 14% growth rates to states. Apart from that, even government of India should be left with 14% growth rates. The numbers seem to be OK so far, but the idea is that in the current year we should be getting an average of Rs 1 lakh crore per month (GST revenue). That is our broad target. It may not happen in the initial few months of this year but we should be able to exceed Rs 1 lakh crore in the remaining months so that average comes to about a lakh crore.
Is this largely a compliance issue?
The evasion of the tax has come down quite a bit but still the perfect system of avoiding evasion will come when we have a new system of return filing wherein it will be very difficult for anyone to escape tax. There is scope for improvement in tax buoyancy as 80-85% of the tax liability every month now is discharged by way of input tax credit only. Only 15-20% is in cash. There is a lot of scope for looking at that input tax credit which people are claiming. Even if we find 5% loophole in it just imagine how much per month collection will go up. And once the new system of return comes everything should be streamlined.
One issue on the agenda is inclusion of petroleum products.
The central government has been saying that we should make it a part of GST from day one. The states were not willing. As a via media we said don’t exclude it from the constitutional amendment. The constitutional amendment allows us to bring it under the GST, only the date has to be decided by the council. We haven’t ever discussed this issue so far in the council. When we bring it to the council only then can we discuss and see what can be done.
I would think out of five, two commodities which can be early birds are natural gas and aviation turbine fuel. But the other items seem to be more difficult because the states feel that, yes of course, they will be getting compensation but they want some kind of own tax revenue security also, which is not dependent on compensation. That is why they might feel a little hesitant.
The anti-profiteering body was envisaged as a temporary one for two years. Industry has some issues with it. How has it worked and do you see it rolling back after two years?
We hope so. It depends on whether the authority has got too many cases pending at the end of two years. But as of now it does not appear it is going to be a major work for us to take care of. Unlike lot of industry apprehension, people were not sure how this authority will behave and how they will crack down, but I find by and large nothing of this sort has happened.
While goods prices have not changed much there was a pinch in services as the rate went from 15% to 18% & input credit benefit was not passed on…
It’s possible because in services it is very difficult to calculate (input tax credit) plus the benefit is not so much also.