In the GST regime, incidence of tax on all commodities came down, says revenue secretary Ajay Bhushan Pandey(Sonu Mehta/HT File Photo)
In the GST regime, incidence of tax on all commodities came down, says revenue secretary Ajay Bhushan Pandey(Sonu Mehta/HT File Photo)

‘GST has been one of the major tax reforms in the history of independent India...it’s a win-win situation for everyone’: Revenue secretary Ajay Bhushan Pandey

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, revenue secretary Ajay Bhushan Pandey said.
Hindustan Times, New Delhi | By Shishir Gupta and Rajeev Jayaswal
UPDATED ON DEC 01, 2019 11:07 AM IST

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 pre-GST 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 Rs 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 Rs 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.

We have done a compilation of the compliances in the previous regime in which businesses had to comply with several taxes and several authorities. On average, there were 495 forms. Now under the GST regime, the total number of forms that most people end up using right from the time of registration to filing of returns and the refund is just 14-15.

For composition dealers with turnover up to Rs 1.5 crore, returns have to be filed annually. Those with turnover less than Rs 5 crore will be filing return every quarter and paying taxes monthly. Only 10% out of about 1 crore taxpayers will be required to file a monthly return under the new system. As I said, there is no check post, gate pass or inspector verifying the stocks. There is free inter-state movement of goods. So, there has been a marked improvement as compared to the earlier regime.

As a new system, we need to work for constant improvement to make the system better and responsive. Over next two years, possibly, most of the medium term improvements in GST will be in place. Also, in first two years of GST, even tax rates were reduced a number of times. Reduction in overall tax rates was to the tune of Rs 1 lakh crore a year. As GST has completed two years, a need was felt that we look at things holistically and try and see what more could be done to simplify the system and improve compliance.

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.

Government will soon make e-invoicing mandatory — what is the roadmap and how will it help the industry?

E-invoice is an extremely progressive concept that would also bend the lending rules for MSMEs [micro, small and medium enterprises]. The GST Council approved the standard of e-invoice in its 37th meeting held on September 20, 2019 and the same along with schema has been published on the GST portal. Initially, the e-invoice will be rolled out in a manner similar to the e-way bill system first as a pilot from January 1, 2020. It will first be made voluntary for taxpayers with turnover more than Rs 500 crore from January 1, 2020 and then for taxpayers with turnover more than Rs 100 crore from February 1, 2020. From April 2020, e-Invoice has been made mandatory for all taxpayers with turnover more than Rs 100 crore.

E-invoice has many advantages. It will soon replace the existing E-way bill system and taxpayers will not have to generate the e-way bill separately. The buyer will get real time information of the invoices issued by the supplier. We expect that e-invoice will have spill over advantages of improving the payment cycle for the industry. Lastly, the returns will be automatically generated for all supplies for which e-invoice have been issued.

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 Aadhaar-based 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 bill-seeking 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.

A system of putting a UPI [Unified Payments Interface] dynamic QR (dQR) code on B2C invoices is also under development that will be rolled out on trial basis with few merchants and few acquiring banks from March 2020. In this system, merchant will generate a QR code at the time billing, including the details of transaction amount as well as GST payable. This will either be printed on the invoice or displayed to the customer. The customer can use any UPI enable app on his mobile to make the payment without any effort at his/her end.

Today, UPI is one of the most popular modes of digital payments and it is expected that this would report a large number of B2C transactions. All these invoices where customer uses UPI-dQR code will automatically be included in the cash reward scheme.

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 single-rate 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.

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