3 min read.Updated: 01 Jul 2018, 10:37 AM ISTRemya Nair
Bihar deputy chief minister Sushil Kumar Modi says the implementation of GST has expanded the taxpayer base, improved tax buoyancy and helped in greater formalization of the economy with minimum disruption
The implementation of the goods and services tax (GST) has expanded the taxpayer base, improved tax buoyancy and helped in greater formalization of the economy with minimum disruption, said Bihar deputy chief minister Sushil Kumar Modi in an interview. Edited excerpts:
What is your assessment of one year of GST?
GST’s implementation has been smoother than what we were expecting. We were expecting a lot of disruption and anger and disenchantment among traders. Other countries, while implementing GST, faced a lot of opposition. Malaysia was forced to scrap GST.
In comparison, India’s experience with GST has been much better. India is a vast diverse country with 29 states and seven Union territories. GST subsumed most of the indirect taxes levied by the centre and the states.
In the value-added tax (VAT) regime, all states had different thresholds and exemptions. States were also at different levels of computerization, with technology-driven tax payments less than 50% in many states. There was a fear that manufacturing states will suffer losses since GST was a destination-based tax.
The tax regime has stabilized in the last five months. The technical glitches have been sorted out. Taxpayers are getting used to the tax return system. The GST Council is also trying to make the tax return filing system easier.
How have tax revenues grown in GST?
GST has led to greater formalization of the economy. The income taxpayer base has increased. The number of taxpayers under GST has crossed one crore. India collected ₹ 8.2 trillion in the first year and that too in just eight months. If you annualize this amount, it is a growth of 11.9% in tax revenues over VAT, service tax and excise collections in the previous tax regime. There is a tax buoyancy of 1.2.
This has been possible despite the lower tax rates under GST and implementation challenges we faced in the first six months as people were getting used to GST.
Tax evasion continues to be a problem under GST. How will this be addressed?
We are working on the new tax return forms. Once those come in, invoice matching can start. At present, there is no invoice matching and there is no way for the states to check the input tax credit claims made by taxpayers. Evasion will come down once this happens. E-way bill (electronic record of goods movement) has only started two months back. It will also check non-reporting or under-reporting of goods movement. 2018-19 will be a much better year for tax collections as compared to 2017-18.
Will petroleum products be brought under GST in the near future?
It is not the right time for petroleum products to come under GST. It is not that petrol and diesel will become cheap if they come under GST. States will continue to impose VAT over and above GST like it is done internationally.
The Council has been criticized for making frequent changes in both rates and rules without letting the tax system stabilize in the first year.
The changes were made in response to the concerns raised by various stakeholders. It is a gigantic tax and not all issues could be foreseen by us. So the Council responded in a timely manner. For instance, the tax return forms were complex and had to be simplified. We are aiming to get the tax return forms vetted by the law committee and get it approved by the GST Council in the 19 July meeting.
Industry has raised concerns over the proposed levy of sugar cess. Do you think cesses should be brought in?
There should not be much distortion of the GST structure. Cesses should be avoided as far as possible. Having said that, a final decision will be taken by the GST Council.
Do you think consensus-based decision making in the GST Council is under threat given the recent differences between some of the states?
GST is a perfect example of fiscal cooperative federalism. Both states and the centre have ceded fiscal autonomy but have still taken decisions by consensus and not by voting. The credit of this goes to (Union minister) Arun Jaitley. There may be political differences but this has not affected the Council.
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