There would be no hike in Goods and Services Tax (GST) rates or any merger of tax slabs in the near future amid the ongoing economic slowdown, Bihar’s Deputy Chief Minister and Finance Minister Sushil Kumar Modi said Saturday. The GST Council in its last meeting has decided to tweak rates only once a year, he said, adding that more measures to boost compliance such as new returns system, Aadhaar authentication of GST registrants would be undertaken in the coming days.
Modi further said that at a time when the country’s economic growth is slowing, states need to consider having a lower rate than the current 14 per cent guaranteed growth rate for compensation payouts.
“I want to assure you that not a single state including the Union Government is ready to raise the tax rates. In times of economic slowdown, you cut tax rates, you do not increase tax rates. To give stimulus, to increase consumption, taxes and duties are cut, not increased … in the near future, no rate increase or decrease will happen till revenue stabilises,” Modi said while speaking at FICCI’s 92nd Annual Convention titled ‘India: Roadmap to a $5 Trillion Economy’.
He said merger of 12 per cent and 18 per cent slabs cannot happen immediately, as it will lead to loss of revenues, which are crucial for carrying out developmental work. “60.6 per cent of the revenues under GST comes from the 18 per cent slab and 11.4 per cent revenues from 12 per cent slab. If it is merged with 12 per cent slab, then our revenues won’t be protected,” Modi said, adding that ultimately though the Council will have to consider a less than five rate GST structure, but not in this fiscal year or even immediate future.
On compensation, he said, “India’s growth is going to be 5-6 per cent, inflation at 4-5 per cent, don’t think any Union government can provide compensation at 14 per cent annualised rate. The average growth rate for taxes subsumed under GST for states in the three years preceding GST was 8.9 per cent,” he said.
Modi said compared to the pre-GST period, 99 per cent of the goods and services have less taxes levied on them post-GST, adding that the Council has cut rates for 422 goods and 80 services so far.
However, he said that fake invoices has become a major issue and the government is looking for ways to check the menace. Since the GST’s roll-out in July 2017, fake invoicing scams worth Rs 44,466 crore have been detected, he said.
The tax authorities will now authenticate registration with Aadhaar for both existing as well as new registrants under GST. Modi said steps are being taken to verify the registrations, some of which have resulted in cancellation of about 18 lakh registrations last week. “Around 18 lakh registrations were cancelled, some were fake, some were not filing returns. In the coming days, Aadhaar will be used to authenticate registration not only for new registrants but also for existing registrants. Also, physical verification would be carried out,” he said.
As of now, there are 1.2 crore taxpayers under GST, of which nearly 50 per cent of the registrants made the transition from pre-GST period, while more than 60 lakh taxpayers have taken new registration.
He also highlighted that the new returns system, proposed to be rolled out from April 1, will help in boosting revenues through the system’s in-built input tax credit matching feature.
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