Designing and testing of the new return filing system, stabilising the e-way bill system and minor corrections in the GST-related laws, which may come up in the monsoon session, will be the 3 key focus areas of the government in the second year of GST, Finance Secretary Hasmukh Adhia said. In an interview with Aanchal Magazine and Sunny Verma, he said natural gas and ATF are “two easier candidates for inclusion” under GST, but the timing will have to be determined by the GST Council. Edited excerpts:
GST revenue collections seem to have stabilised. Is the desired level Rs 1 lakh crore per month?
Yes, that should be the level. We hope to get at least an average of Rs 1 lakh crore for this year. It may vary from Rs 95,000-1,05,000 crore or maybe more or maybe less. But, end of the year, our expectation is that we should be getting an average of Rs 1 lakh crore (a month). It will build up over a period.
E-way bill has been one method to boost revenues. How much has it helped?
E-way bill has helped definitely. The figures of November to February, we were below Rs 90,000 crore. Since March, we have been constantly above Rs 90,000 crore. Leaving aside the March figure which came in April, the month after that also we were at Rs 94,000 crore. So, we hope to maintain a steady growth now.
What about other anti-evasion measures? Something like reverse charge mechanism (RCM), which is still on hold.
We did a lot of discussion on it (RCM) and we found that in the GST regime, it is not a major source of tax evasion. The major source of tax evasion is underreporting and it can only be checked when you have a system of perfect return filing in which everyone’s sales is compared to his purchases. So, if he has purchased goods worth Rs 1 lakh and if he is showing a sale of only Rs 50,000, he will immediately be caught. End-to-end IT system is what the GST is all about and that itself should take care. RCM is not going to be a major loophole for us … because it will depend on self-declaration. If I am buying from unregistered, I must declare but if I don’t declare then, there is no way we can catch it. The only way we can catch it is if it comes into the system or transactions.
Will you be stepping up actions to check evasion or underreporting going forward?
No, our first bet is on IT system. The IT system, the reporting system and the data analytics itself will tell us where the theft is happening. After we do that kind of processing, then only there is a need to go to somebody and say, please, what is happening? Our first bet should be data analytics and that is what we are doing and we will continue to do even more going forward. There is some bit of physical inspection required sometimes on the road to check that people are not plying without e-way bill. Sometimes you have to stop the truck randomly to check the e-way bill, so that people are careful about it.
Going ahead, what will be the major focus areas? Will we see discussion on inclusion of petroleum products and real estate under GST?
Our immediate attention should be on two things: one, seamless, easy return filing system and secondly, we should be watching the revenue stream because end of the day neither the Central government nor the state government should lose from GST. As of now, the (revenue) growth rate has been as per expectations and I don’t think we are losing. So, we will have to concentrate on revenue stream. But once the revenue stream stabilises, we must constantly evolve everything. As far as those two items (petroleum products and real estate) are concerned, it is for GST Council to take a view whether they want to bring these items in GST or not. Discussions will continue. When, I cannot say. It will be discussed at suitable time.
Among the petroleum products, will natural gas and aviation turbine fuel (ATF) come before petrol and diesel?
They are two easier candidates for inclusion, I would say so. But when would they come (under GST), we don’t know.
Earlier, Finance Minister had talked about merger of tax slabs or less products in 28 per cent slab under GST. How much scope is there vis-à-vis the revenue stream?
As of now, the scope is very limited because we are still in the process of stabilising the revenue. But as and when scope is created, Council should look at it.
There are talks of rate cuts for some items like cement and other construction materials.
First of all, there has to be a scope to reduce more number of items (in 28 per cent tax slab) and secondly, if there’s scope, what items should come first or what items should come next, that is a matter of sequencing to be decided by the Council.
Are you satisfied with the performance and achievements in the first year of the GST? It has been a tiring effort from legislation to implementation.
Yes, we are quite satisfied. There is no reason to be defensive. Initial glitches do come in any tax reform and our glitches were not so glaring. That was expected. But the most beautiful part of it is that we have been doing course correction almost in real-time and the Council has also been supporting us. Whenever there are changes in notifications, rules or rates, the Council has constantly evolved. That’s why the GST system has become beautiful. It has stabilised much better compared to any other country. In such a short time of one year, it has almost become smooth. So we are quite satisfied about it and we do feel that our country, the political masters of this country, the various state governments and also the bureaucracy of states and Centre, they have really done a tremendous job in giving this gift of reform to the country. We should really feel happy about it.
There are no deadlines to rush against in the second year, so what will be your key focus areas?
In the second year of GST, there are some minor corrections required in the law, small legislative amendments are required and that we hope to bring up in the monsoon session. And then we are busy designing the new IT system and putting it up for testing before the people. We want to bring it as early as possible. The third priority is stabilising the E-way bill system also. We have to see that 100 per cent trucks and 100 per cent vehicles carry with them an E-way bill. That will also take some time because people are going without E-way bill and officers have to physically check that. These are the three main things which we have to focus on in the next year.
You wrote to CBIC officers to buck up as the average monthly collections. What is missing and how can the gap be closed?
Nothing is missing. They are doing their job. The only question is if they can do better. The point is that everybody has to work hard, not only in terms of physical checking but also looking at data, their returns, top 100 taxpayers in an area and reasons for monthly variation in their tax returns. All these things we have to constantly (assess), that too online only. The Central officers and state officers have got data online, everybody’s return is visible to them online. They have to simply compare why did some assesses not file tax returns. So that kind of monitoring is required. Nothing is missing. They are doing it, but they can do better. That’s the idea.
In terms of taxpayers base, do you see signs of expansion in the new GST regime?
We do because the number of taxpayers has increased like anything. Old taxpayers that migrated from earlier regime of excise, service tax and VAT were 63.76 lakh, and the new registrations after July 1, (when GST was implemented) are 48 lakh as on June 24. That’s a huge expansion of the tax net, almost doubling of (the taxpayer base). Now we have total registered taxpayers of 1.12 crore. And as per an analysis done by (Chief Economic Adviser) Arvind Subramanian pre-GST and post-GST, on an average, 13 per cent growth rate was there last year in tax collections. That’s a good number, at a time when nominal GDP growth rate is around 10.5 per cent last year, it’s (13 per cent GST tax collection growth) a huge number.
But some states like Punjab, Bihar, have lost out on revenue collections?
On the whole, most of the states are gaining. Some states like Punjab, Uttarakhand, Himachal Pradesh and Bihar (are losing). They will get the compensation, so that’s why the compensation is there. They will not suffer.