In an interview with businessline, Vivk Johri, Chairman of CBIC, says rate rationalisation exercise is “challenging” especially when collection is good
Vivk Johri, Chairman of Central Board of Indirect Taxes & Customs (CBIC), feels universal e-invoice is an ideal situation, but it is difficult to set a timeframe for implementing that considering the large number of assesses. In an interview with businessline, he said that rate rationalisation exercise is “challenging” especially when collection is good.
Excerpts from the interview:
Q
With ₹1.5-1.6 lakh crore of monthly GST collection becoming the new normal, the big question is when we will see rate rationalisation?
A Group of Ministers (GoM), under the Chairmanship of the then Chief Minister of Karnataka, has already delivered on two of three terms of reference. One of them is about correction in inverted duty structure (IDS) and second on exemptions both for goods and services. Based on the recommendations, IDS related with some items such as mobile handset, footwear and some of renewable energy products has been corrected. Also, some of the exemptions have been withdrawn and some of them modified. Now, the only issue that remains to be addressed is overall rationalisation of rates.
My expectation is that the GoM will be reconstituted now. Only then, some decision can be taken about how it will happen. There would be concerns about doing it in a manner that does not impair revenue collections in a major way. That will be the biggest challenge with rationalisation, particularly when GST collection is good. There will be a concern that any rate rationalisation, that is done, is either calibrated in such a way that the revenue implications are phased out over a period of time, or it suitably addresses the revenue concerns in the States.
Q
Another issue is about standard audit practices. How are you going to address that?
In the last meeting, the GST Council had approved the standard GST audit manual for all States and the Centre to follow. So it describes in great detail the methodology for audit, how unit should be selected for the audit, what kind of documentation should be used, what kind of checks should be exercised, how audit reports should be drawn up and communicated to the taxpayer. But another development which is of interest here is the co-ordination mechanism that has been reactivated with the States. From May, we revived the system of having co-ordination meeting with the States. These meets can also be a useful forum where differences in practices in audit or any other functional vertical, in GST can be discussed so that the taxpayer has a uniform experience across the country.
Q
We have State-wise collection data as well as separate data for CGST, SGST, IGST and Cess. But we still do no not have sector-wise data which is critical for policy formulations. When can we expect that?
There is a trade-off between trying to make the return filing for the taxpayer easy and being able to generate very granular data about GST revenues. Because it is a new tax, the Council chose to adopt a mechanism in which the return format is kept simple so that it’s easier, particularly for small taxpayers, to file returns. As a result, we are able to collect data only at the two digit (HNS) level. Our ability to dive deeper into this data and do a more granular and segmented analysis of the sources of growth and revenue in terms of industry sectors and service sector is somewhat limited, but we are starting work on that. The additional input is also available in e-invoices because these indicate the headings of the goods or services which are being supplied. The only problem is that e-invoice data is not indicative of tax collections. It indicates the liability to pay tax but whether that tax is actually been paid or not, that can be verified only when the returns are filed. So, returns are a clear indicator of revenue collection segment wise. We are starting some exercise and analysis on collecting sector-wise data. It will take some time to put together that system.
Q
E-invoicing is going to be mandatory from August for business with annual turnover of ₹5 crore. When it will be lowered further or in other words will be mandatory for all assesses without any threshold?
Eventually, since we have the technical capability and the capacity to capture e-invoices, we should move towards a system where invoices become universal. But there are few things we will have to do before we’re able to migrate to that situation. One it will have to be a calibrated movement, because as you lower the threshold further, there is a sudden large growth numbers, that number of taxpayers who have to comply with it. So, we will have to think of assisting them in some way, either by providing ERP software which can help them generate invoices easily. It is difficult to set a timeframe for it. But we will have to move towards more or less universal invoices.
Q
What are being worked upon to make procedure easy for courier companies in compliance of Custom laws?
On the Custom side, we are quite actively thinking of improving things particularly through the courier mode. Currently, we have nine courier terminals across the country and each one of them have a standalone software which currently does not support the disbursal of benefits to exporters. With growth in e-commerce and with the use of courier mode particularly by small exporters, the industry has been representing that export benefits such as RoDTEP (Remission of Duties and Taxes on Export Products), RoSCTL( Rebate of State and Central Taxes and Levies on Export of Garments and Made-ups) and drawback should also be available for the courier mode. We are drawing up a plan of how we can achieve that. Either we will merge the courier mode with the present ICE system and migrate courier clearances also to ICEGATE or to have some interconnectivity between the two.
Q
CBIC also started a scheme for exporters, especially those who belong to One District One Product, to send their goods. Are you planning to expand this to all the districts?
We have successfully implemented the initial phase of our plan, partnering with the Postal Department for ‘one district one product’ exports. This allows small exporters to entrust their export parcels to local postal authorities, who then facilitate their movement to the nearest foreign post office for customs and regulatory nods. Plans to extend this initiative to additional districts is on the anvil.
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