just a few hours to go before GST becomes effective, Finance Minister Arun
Jaitley has answered all vital questions related to GST in an interview.
Questions are pertinent touching upon all the aspects of GST, commercial,
social and political. All answers put
together look like a clear manifesto on GST. If the questions reflect the popular
concern with GST implementation, covering prices, political opposition and
traders’ apprehension, the answers of the Finance Minister impress as
comprehensive and based on sound common sense with no axe to grind. Some of the
questions and answers are given below as published in the media.
will GST be? Some experts as well as economists have suggested a dip in growth.
Any change, even a small change in mode of
filing a return, is disruptive. I see a minimal disruption in this considering
the smooth manner in which most people have already migrated to the GST and
some new registrants are joining now. I think in the medium and long term more
revenue means more spending by the government. I do not want to get into
numbers. No economist told me that oil would be at $40. No one told me that
India would grow by more than 7% in the year of demonetisation. People talked
of negative growth or growth rate falling to 3%. I do not want to get into
their predictions. I believe GST is an efficient and simple system with less
GST has been
in the works for long, but there is still some last-minute confusion. Industry
still seems jittery. Software solution providers say they are not ready and
have sought more time.
Normally in a reform process private
sector is ahead of the government. This time the government seems way ahead of
the private sector. For an industry association to say postpone it in the face
of a constitutional amendment was highly regrettable. There will be challenges
initially. There can be hiccups even in the most perfect technology but the
beauty of a perfect technology is that it removes those hiccups as soon as
possible. This is a reform that is in the interest of the common man, traders,
businesses, industry and the whole country. You need to be patient.
has sought deferral of GST and the Opposition is planning to boycott the
midnight rollout function.
Constitution does not permit (postponement of
implementation). Every political party should have one position on GST. Either
you are for or against it. There is no decision related to this tax that has
not been endorsed by any political party. Rates have been decided by consensus.
Every state government was party to the decision-making process. If any
opposition party has objection to any rate, then it can refund the SGST portion
of the state in which its party is in government. This is a ‘saanjhi vyavastha’
(joint mechanism) for the whole country. We have had consultation at every
stage of the formulation of the new tax. At the time of constitutional
amendment, we incorporated suggestions made by Congress. All bills have been
approved by them. Their state governments have passed GST legislations. Finance
ministers of the states where their party is in power have
participated in the council and agreed to the GST framework.
Will we see
prices coming down?
On an overall basis, the net weighted average of
the whole consumption basket is less than what it was. So, in terms of weighted
average, it should come down. Being a more efficient system, GST will
check tax evasion. Quantum
of tax collection will also go up in the long run.
pass on the tax benefit to consumer?
There is already an inbuilt mechanism of
anti-profiteering clause. I hope we do not have to use it. It should act as a
apprehensions among smaller businesses who form the party’s base. Some are even
It is not going to be difficult for
small business. There will be no tax on neighbourhood mom and pop shops. Those
with turnover of up to Rs 20 lakh do not have to pay any tax or register. For
those with annual turnover between Rs 20 and Rs 75 lakh you can avail of the
composition scheme. In the composition scheme, traders need to pay 1% tax and
manufacturers have to pay 2%. Those with turnover above Rs 75 lakh are not that
small and must be already availing services of a tax consultant or a CA
(chartered accountant) even now.
Every change is opposed by one or other group. I
am not so worried about it. The GST Council is a
body of elected persons. It is a responsible body. If anyone feels calculations
were not correct, they can represent, the council can consider. There is a
fitment committee and council has considered more than 60 cases. You can’t
expect the council to act under pressure. The argument that I did not pay tax
under the old system and there was scope for me to evade taxes, this complaint
cannot be entertained.
GST will lead to a rise in inspector raj.
No, on the contrary, GST will end
inspector raj as the person will be replaced by software. If you honestly pay
your tax and file your return every month, you may not need to even see you
assessing officer. It will be like income tax, where you file online. For
businesses, manufacturers, traders there was no financial integration. Every
state had their own rates and their own laws. GST integrates it. If you want to
transfer goods from one state to another, you had to pay multiple taxes as also
file multiple returns. You had to go multiple times to your CA or even meet tax
officer. There was scope for corruption, according to people.
Now, there is one tax. You have to take one
GSTIN number. People find any new technology challenging. When mobile came,
older people found them challenging. If you can’t do it yourself you can ask
someone to do it for you. You still go to the CA or tax consultant. After
taking the GSTIN, if you sell goods directly to consumers then you have to file
one return by the 10th of every month. Just give details of your sales and tax.
We have extended this deadline for the first two months. If you sell to
businesses then you give a list of who you have sold to with their GSTIN. The
software will automatically match files. You do not have to file that return,
it will be generated by the software itself. States will assess 90% of small
assessees. Those over Rs 1.5 crore it will be divided between states and
centre. But you will deal with only one authority.
multiple tax rates have made the GST very complex.
It is not complex. If we had not gone for
multiple rates it would have been a conspiracy against the common consumer.
Those that write columns don’t have to run the country. It is every easy to say
that there should be one rate. If for instance we were to have a single rate of
15% for GST that would mean even food products that are consumed by poor will
face 15%. We have kept food items at zero. We have to see who the consumer is.
I had said in Parliament — should a hawai slipper and Mercedes be taxed at one
We adopted two principles while formulating the
rate. We took the tax incidence on the day on that commodity or service and put
it in the nearest slab it fell in. Secondly, the idea was that the exercise
should be a revenue-neutral rate, otherwise government revenues will suffer.
Reality is that the weighted average of taxes is lower than total tax
incidence. There were a number of items which had a total tax incidence of over
31%, so they were put in 28%. But soaps and toothpaste are common-man items, so
the rate on these was consciously brought down to 18%.
In the long run, rates would converge. As the
tax base rises, rates would become more reasonable. If tax collection
increases, government will have more resources in its hands and would be able
to spend more on welfare schemes and infrastructure creation. This would bring
significant benefits in the medium and long term. A rise in indirect taxes will
also lead to a rise in direct taxes as the old system of pakka and kaccha
bills’ (tax paid and nontax paid bills in cash) would end.
that were exempted are protesting.
No commodity can claim a fundamental right to be
petroleum and real estate?
We have to see what is the comfort level of the
council going forward. We would want petroleum products and realty to come
under GST. For that the success of GST is very important.
There is a
concern on some states continuing the check post system post GST.
As far as the e-way system is concerned, there
was no final decision by the GST council. Some more discussions are required.
Once we decide the mechanism, we will follow and till then states would be free
to carry on with existing system. Many states have their own system but some
others do not have it.
seems a lot of interest in GST implementation by India.
You have to see that global growth is yet to
recover… Large countries are becoming protectionist themselves. The world
accepts that if anyone has shown the potential to carry out structural reforms,
it is India. We carried out FDI (foreign direct investment) reforms and we
received the largest FDI in the world. The government and Prime Minister have
shown that political-level corruption can be ended. Through insolvency
ordinance, the government has created a framework that allows for large
industrialists to be taken to insolvency proceedings… (On) Air India there had
been discussions for decades…The cabinet has taken a decision on it just
What is the
next step on Air India?
A group of ministers has been set up. It will
work out (the details).