Home >politics >policy >Frequent recalibration of rates strengthens GST spirit: Himanta Biswa Sarma

Seeking to alter public perception that the goods and services tax (GST) had led to a higher tax on some items and heeding complaints by businesses that the new indirect tax regime had heightened their compliance burden, the GST Council offered concessions to the tune of Rs20,000 crore at the 23rd meeting of the federal tax body in Guwahati on Friday.

Frequent changes in tax rules and rates as well as the continuation of some pre-GST era schemes for exporters have sparked criticism that the new regime is yet to settle down and that its objective of simplifying indirect taxation and making it transparent hasn’t been met. Congress-ruled states are in the meantime pitching for widening the ambit of GST.

Himanta Biswa Sarma, finance minister of the Bharatiya Janata Party-ruled state of Assam, which hosted the latest GST meeting, however, said frequent recalibration of the tax system only strengthens it. Edited excerpts from an interview:

At every council meeting, there are changes in rules and tax rates. What went wrong with the original design and the fitment of items into various tax slabs?

It is expected that a major tax reform such as GST will take time to settle down. We, as a nation, have decided to opt for a unified tax across the country. GST is a combined tax subsuming Union and state taxes. In deciding the unified GST rate on particular supplies of goods and services, there are several considerations to be taken into account.

On all the implementation challenges, we need to find practical solutions step-by-step. It is not possible to design a foolproof GST which needs no council to monitor implementation on the ground. The council takes note of how the new tax regime is evolving and as revenue stabilizes, we will continue to reduce tax rates. That was the approach we had adopted from the very first day.

Experts have pointed out that the council is engaged in knee-jerk reactions to a hue and cry from businesses and traders, which kills the spirit of GST and undermines the benefits to be realized from the tax reform. Your comments?

There can be criticism anyways. One can criticize well-intended decisions to be knee-jerk reactions and studied restraint to being non-responsive.

The council works in its own ways and at its own pace irrespective of the noises outside. We take pragmatic decisions considering the revenue, implications to businesses and future growth of the economy on the basis of the data placed before the council. I believe the changes made in rules and rates only strengthen the spirit of GST. It has never been the intent of the council to put too much compliance burden on small and medium enterprises.

What has been Assam’s experience with GST implementation? Is there a revenue loss?

In the first few months, we did not do well. In October, we came significantly closer to the tax collection that we had prior to GST but did not get the 14% increase envisaged in the new regime. (As per the formula for Union government to compensate states’ losses in the GST regime, state revenues are projected to grow 14% annually. Any shortfall from this level is made good by the Union government). We legitimately believe that in the next three-four months, we will meet the target.

What are the challenges that north-eastern states face in the GST regime? As an oil-producing state, does Assam face any difficulty?

Our oil and gas industry is facing some problems because select hydrocarbons—crude oil, petrol, diesel, jet fuel and natural gas—are not part of GST, while the services and the equipment used in their business attract GST. Not getting rebates for the taxes paid on such services and equipment used is a problem that they face. At the same time, if you bring these items into GST, you may have to impose a heavy cess on them. (The burden of central and state taxes on auto fuel overshoots the highest slab of 28%. For example, it comes to 49% in the case of retail price of petrol charged in New Delhi as of 9 November, according to details available from Hindustan Petroleum Corp. Ltd) However, this is an issue that the council will take a look at, probably next year. GST being a new tax system, I will refrain from assessing it before we complete one full year.

Congress-ruled states have suggested that it may be desirable to include land, electricity and fuel in GST. Your comments?

GST Council does not function on party lines. The council does not take any view on suggestions made by any party outside the council. If any minister gives a view in the council, it is duly taken note of.

What about technical glitches?

The problems relating to IT (information technology) infrastructure are gradually getting resolved. We have decided to observe how things work in the first six months of implementation. This is the first time such a reform is implemented and we have to resolve issues one by one.

What is the broad direction of GST’s evolution?

The initial teething problems are settled. We have now entered the consolidation stage. Particularly, in states like Assam, we have not seen a single agitation on GST. If you take a bird’s eye view of the country, where is the agitation? Problem areas have been addressed one by one.

Will there be further rationalization of tax rates?

That has been the idea all along. Tax rates can be cut from 18% to 12% in many cases. But that depends on revenue. The 23rd meeting of the GST Council has been path-breaking. We have taken many decisions in favour of businesses in general and specifically for traders, small-scale industry and the people. Tax rates on many items have been slashed from 28% to 18%.

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