Revenue Secretary Ajay Bhushan Pandey on Tuesday said it's not fair to say that Goods and Services Tax (GST) is responsible for the current economic slowdown in the country. In an interview to CNBC-TV18, Pandey said, "GST has given good growth till two months back for both Centre and states that too at much lower rates and I am optimistic that it will continue to do so."
According to Pandey,
GST collections will pick up from next month (November), "GST collections are a reflection of how the economy performs along with collections efficiency and enforcement." Edited excerpts: Senior economic policy experts have recently blamed Goods and Services Tax (GST) for the current economic slowdown. Your comments?
A: It's been three years to GST and it is the biggest indirect tax reform where 17 taxes and 24 cesses got merged into one tax. If you see the compounded annual growth in revenue of over 20 plus states in the first two years, it was 14 percent. That too, when the initial rates of GST were much lower than the rates which existed in the pre-GST regime and over time, the rates have been further rationalised. Many rates were reduced further during the journey so far, leading to a reduction of more than Rs 1 lakh crore of revenue per annum.
So, if 20 states, with much lesser rates, could get compounded annual revenue growth of 14 percent and more, then it is not fair to say that GST is responsible for current economic slowdown just by looking at the GST collections of last two months that too when a major part of the country was facing severe floods. GST has given good growth till two months back for both Centre and states that too at much lower rates and I am optimistic that it will continue to do so.
Your comments on the argument that the government might go in for rate hikes to meet it its revenue requirements? In some cases, the government might argue that the rate hike has been done to correct the impact of inverted duty rate structure?
A: We have recently formed a committee of officers to have a holistic view. When the committee will meet, it will discuss various suggestions including those made by the industries. At this point in time, it is premature to say without having seen the recommendations of the committee on inverted duty structure or input tax credit. Once we receive the recommendations of the committee, we will take them to the GST Council which will take a view on it.
When is the next GST council meeting scheduled?
A: The last GST Council meeting we held was in September. The meeting has to be held every three months. Once the recommendations of the committee of officers are examined, those will be placed before the GST Council at the earliest convenient date.
Your comments on the current size of the GST compensation cess kitty? GST Council was informed in the last meeting that the funds available in the compensation cess basket to compensate the states for 14 percent growth are not enough?
A: Since the GST Council is the competent authority to decide how much quantum of cess will be levied on which item, it will for the council to consider the current position of the compensation cess kitty. In the last GST council, we had apprised the council members about the funds available in the compensation cess kitty. Council will take a view on how to meet the compensation requirements of the states if the funds are not enough, the central government cannot take a view or discuss this on its own.
Is there a mandate to the committee of officers on revenue mobilisation to give suggestions on rate rationalisation?
A: The scope of the committee of officers is quite wide. If they want, they can give suggestions on rates as well. The entire idea to have this committee is to let the officers discuss various issues with an open mind. If the committee wants they can make suggestions on any aspect of GST.
How does the government plan to meet the yearly GST revenue targets, given the fact that the poor GST collections are likely to continue for another two more months?
A: The GST collections were very healthy in April, May and June. Only during the last two months, it has been on a lower side. During these two months, we have also seen a few sectors such as cement, automobile and steel have not performed well. On the imports side, the collections have seen a decline. There was an impact of floods which had impacted badly on economic activities in large parts of the country. Now we have to watch the revenue performance over the next two months, only then, we will be able to make a fair assessment. I would not like to make any comments on the performance right now. I expect the collections will pick up from next month. GST collections are a reflection of how the economy performs along with collections efficiency and enforcement. So, we have to see how progress happens on these two parameters.
Your view on including petroleum products such as aviation turbine fuel (ATF) and natural gas under the ambit of GST?
A: The matter was placed before the GST Council earlier. However, it had deferred the inclusion of ATF and natural gas under the ambit of GST. If there is a fresh formal reference made to the GST Council, it may again consider and discuss it.
When it comes to corporate tax cuts announced, it is understood that not many companies have urged to shift to the new regime. What is the response so far? How many companies have expressed an interest in the government to shift to the new rates?
A: There are only a few companies which have the benefit of lower rates due to exemptions and thus it may not be beneficial for those to shift to the new rates. But, there are a large number of companies which would want to shift to the new rates. The response was also very overwhelming immediately after the announcement which is a clear sign as a large number of corporate taxpayers would want to shift and take the benefit of the new reduced corporate tax rates.
When it comes to numbers, the companies are not supposed to get back to the government to inform the shift. The government will come to know only when it either receives the next instalment of the advance tax, where the government will study how many companies have filed their advance tax based on the new rates or during their return filing, which will happen only next year. There is a proposal that the government might now go in for reducing the personal income tax rates, based on the suggestions of the task force report. Where are we on this? How soon can we see this?
A: As a matter of practice, all income tax policy decisions related to rates are taken up only at the time of Budget. Only in exceptions, we see a decision like the recent cut in corporate taxes was taken ahead of the budget. Any taxation decision has to keep into account the revenue requirements of both centre and states as a part of the income tax collections also goes to the states.
The government has been given a report by the task force committee on the simplification of direct tax legislation. Where are we and how soon will the government make the report public? Is there a plan to replace the Income-tax Act with the draft bill given by the task force?
A: This report is under consideration. Our department is already studying it very seriously. Budget will be the right time to consider the suggestions and recommendations given by the task force. It is not a matter of tweaking one or two policy changes, it is for the purpose of simplification of the I-T Act. Its full implication needs to be studied - how the transition would happen, what will be the transition period, how the government will deal with teething troubles, etc. All this needs to be seen in the entirety and the government has to take a calibrated view on it.
It is understood that the government has been working on for quite some time on easing of compliance, but taxpayers seem to continue to say that it is not easing but compliance is becoming a burden. Your comments?
A: As far as the revenue department is concerned, the focus is on ease and improving compliance for both direct and indirect taxes along with measures to check fake claims and evasions. In the pre-GST era, there were 495 forms which were supposed to be filled as against only 14-15 forms annually now under GST. Now in GST, we have no check posts, no octroi, no inspector raj, no excise gate passes and no entry points. Now, one is to file only a few forms besides a single return that too online. Over one crore people file their tax returns every month and on the last day of the return filing itself over 25 lakh returns get filed. We get around Rs one trillion revenues every month. Given this magnitude, definitely there will be some areas where there will be troubles and improvement is a continuous and consistent process. Government is working towards it.In the case of direct taxes, we are also easing compliance. The government is trying for getting information and linking all information through the statement of financial transactions, where pre-filled returns will facilitate the filer at a click of the button and she/he would not have to run after getting tax certificates from mutual funds, banks, etc. for disclosures. In pre-filled returns, you are supposed to supply only the missing information. So, the taxpayers while filing returns have to put in only minimal effort. Earlier, there was a need for digital signature also. But now, with the Aadhaar authentication, even that is not required.