Home >News >India >GST reduced tax rates, doubled taxpayer base to 1.24 crore: Finance Ministry

NEW DELHI : The Finance Ministry on Monday said the GST regime has reduced the rate at which people have to pay tax, helped increase compliance and doubled the taxpayer base to 1.24 crore.

In a series of tweets on Monday, also the first death anniversary of former Finance Minister Arun Jaitley, the ministry said before goods and services tax (GST) was introduced, the combination of value-added tax (VAT), excise, sales tax and their cascading effect resulted in high standard tax rate of up to 31%.

“It is now widely acknowledged that GST is both consumer and taxpayer-friendly. While the high tax rates of the pre-GST era acted as a disincentive to paying tax, the lower rates under GST helped to increase tax compliance," the ministry said.

The number of assessees covered by the GST at the time of its inception was about 65 lakh. Now the assessee base exceeds 1.24 crore.

GST, which subsumed 17 local levies and 13 cesses, was rolled out on July 1, 2017. Jaitley held the finance portfolio in the first term of the Modi government since 2014 and was the finance minister when the GST regime came into force.

“As we remember Arun Jaitley today, let us acknowledge the key role he played in the implementation of GST, which will go down in history as one of the most fundamental landmark reforms in Indian taxation," the Ministry tweeted.

The multiple markets across India, with each state charging a different rate of tax, led to huge inefficiencies and costs of compliance.

“GST has reduced the rate at which people have to pay tax. The revenue neutral rate as per the RNR (Revenue Neutral Rate) Committee was 15.3%. Compared to this, the weighted GST rate at present, according to the RBI, is only 11.6%," the ministry said.

Businesses with an annual turnover of up to 40 lakh are GST exempt. Initially, this limit was 20 lakh. Additionally, those with a turnover of up to 1.5 crore can opt for the Composition Scheme and pay only 1% tax.

For services, businesses with turnover of up to 20 lakh in a year are GST exempt. A service provider having turnover of up to 50 lakh in a year can opt for composition scheme for services and pay only 6% tax.

“Once GST was implemented, the tax rate on a large number of items was brought down. As of now, the 28% rate is almost solely restricted to sin and luxury items. Out of a total of about 230 items in the 28% slab, about 200 items have been shifted to lower slabs," the ministry said.

In an article on the first death anniversary of Jaitley, Finance Minister Nirmala Sitharaman said, "From midnight, July 1, 2017, the unimaginable happened — all of India became one market, interstate barriers disappeared, multiple taxes were subsumed to become one, double taxation was eliminated, the cascading effect of taxes got mitigated."

GST “ensured that there were no more queues of trucks and no more state barriers," she wrote in Indian Express.

In the pre-GST era, the total of VAT, excise, CST and their cascading effect led to 31% as tax payable, on an average, for a consumer.

"Today, we have 480 items in the nil or 5 per cent tax rate, 221 items are at 12 per cent and 607 items in the 18 per cent rate. Only 29 items are in the 28 per cent tax rate," she said adding the loss of revenue, due collectively to the reduction in rates, has been more than 1 lakh crore annually.

An analysis by the Reserve Bank of India (RBI) observes that since the rollout of GST, the rate changes have brought down the GST incidence from 14 per cent to 11.6 per cent.

"The tax base has widened in the last three years. ....The average revenue collected per month for the nine months (July-March) in 2017-18 was 89,700 crore. In the next year 2018-19, this per month average revenue collection rose by 10 per cent to 97,100 crore."

"In FY 2019-20, the revenue per month was 1,02,000 crore. This steady increase was despite the various concessions and rate reductions mentioned above," she wrote.

In a tweet, the Office of Nirmala Sitharaman said “In order to ease the GST compliance burden during the COVID-19 crisis, the government introduced several relaxations".

Listing out the various rate reduction and industry friendly decisions taken by the GST Council, the Ministry said the housing sector has been placed in the 5 per cent slab, while GST on affordable housing has been reduced to 1 per cent.

All processes in GST have been fully automated. Till now 50 crore returns have been filed online and 131 crore e-way bills generated, the Ministry added.

“The GST system allows the generation of e-waybills using several modes, to enhance taxpayer ease. 61.74 per cent of the e-waybills generated have been through the website, 21.55 per cent using the Excel tool, and the rest were through mobile, SMS & APIs," the Minister's office tweeted.

The Finance Ministry further said in light of COVID-19, taxpayers were given certain compliance-related relaxations to ease their burden. Relief was provided by way of payment deferrals, reduced interest rate, and waiver of late fee/capping of late fee to 500 in certain cases, it said.

For smaller taxpayers with an annual turnover of up to 5 crore, the rate of interest for late filing of GSTR-3B returns was halved to 9 per cent if filed by September 30, 2020.

Also, the mandatory requirement of filing returns and statement of outward supplies using digital signature was relaxed.

The Ministry said tax rate on common-use items such as hair oil, toothpaste, and soap came down from 29.3 per cent in the pre-GST era to 18 per cent under GST regime.

Also, appliances such as fridge, washing machine, vacuum cleaners, food grinders & mixers, vegetable juice extractor, shavers, hair clippers, water heaters, hair dryers, electric smoothing irons,TVs (up to 32 inches) have all seen tax rates lowered from 31.3 per cent to 18 per cent due to GST.

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