Hasmukh Adhia, revenue secretary, said that the GST Council is working to ease the pain points resulting from shift to the new indirect tax regime and feels that within a year, most of these problems will be over. “In transition, problems will be there but as long as the GST Council and the government are open to suggestions, as long as they are continuously giving relief to people for whatever problems they have faced … as long as that process of adjustment is taking place regularly, people should not worry,” Adhia said in an interview with Sunny Verma and Anil Sasi. “But it’s a great thing for the country in the long run and we should stick to that commitment to GST,” he said. Edited excerpts:
Is the government planning any rationalisation in terms of GST rates?
Rationalisation has to be done for sure. The finance minister has said that we will wait for revenue trends to emerge, but some rationalisation is required, and an exercise has been initiated for that. The final decision is to be taken by the GST Council. The Council has already done some work on rates to ease the pain points.
What will this rationalisation entail?
Basically, there are two rationalisations. One is process rationalisation, the other is the rate rationalisation. Process rationalisation, some of that will happen in the (October) 6 meeting of the GST Council. As for rates, we want to ensure that there are no classification disputes, that’s why rationalisation is required. Secondly, rates can be reduced for products that are not yielding any significant revenue.
In terms of tax slabs, is there scope for some clubbing?
No. Tax slabs will remain the same for now. This is not the time to change the tax slabs, it will be discussed in future. But some items can move from one (slab) to the other (slab), that is possible and that is also part of the rate rationalisation.
Are you satisfied with the revenue mobilisation or the revenue buoyancy post GST rollout?
Buoyancy has not yet come but revenue mobilisation is so far on expected lines. Buoyancy will come after compliance is complete and system has stabilised. Right now, the government is depending upon their self assessment returns.
Will there be any relaxation in compliance burden for the MSME sector?
MSMEs and the informal sector are facing many issues. We will take it up with the Council and the Council will take suitable decision to address them.
How genuine are the concerns of the exporters?
People have misunderstood (this issue). They are saying that so much refund is pending, but it’s not like that. The figure of Rs 65,000 crore of transit credit is being mixed up with exporters’ refund, but it has nothing to do with that. That is transit credit being claimed by them and that is also part of input tax credit, it is not refund. But this issue of refund is not so severe because for three months, there was a duty drawback scheme. It is now only that the working capital will be blocked. But we have decided to clear their refund as early as possible and process has been put in place for that. We will also look at other points of exporters.
Do you plan to review limit for availing Composition Scheme?
The Council will discuss all options, and what are the options for SSI (small scale industry).
Will there be some rationalisation for filing of single service tax return?
As of now, according to law, there is no scope for single tax return for services for the country because for that, we will have to amend the law. However, it can be one agenda item in future.
Some people also suggest that cross-matching of invoices can be made simpler?
I don’t understand how it can be simpler than this. Now in Russia, for example, they are trying that all invoices go into the Central registry straight away, but is that possible in our country? Russia is trying that every invoice is generated online and goes into central registry. There are other countries that do it — centralised invoice creation. A software is given (by the government) and businesses can create online invoices there. So, the moment a transaction takes place, it goes into the central server. If everybody in India agrees for that, then we can give them pre-filled data completely, but that is something which is difficult for India because that will require internet connectivity all the time. That is something which is not possible in remote locations.
Some of the criticism being levelled is that the GST rollout was hurried and that the GST Network was not allowed to conduct trials and a certain amount of discretion is being allowed to tax inspectors?
As far as the right planning is concerned, one has to make a beginning and any time you begin, there will be initial problems. It is not that you can always have a system in which hundred per cent safe landing can be done. At any time you start such a (reform), you will learn from experience that what are the pain points. So, no time is a good time, in that sense. If we keep waiting for so long, then we will not be able to do it. But these are initial transition problems. (On the other issue) there is no question of the discretion to the tax inspector. Monthly returns are not inspected manually, there is inspection of only annual returns in the GST regime. There are only those odd cases where people are not giving bills, or overcharging or not carrying the state level E-way bill – inspectors can go in for such issues. National level E-way bill is yet to come.
Has the commerce ministry sent a proposal to relook at taxation of unbranded food products?
We have resolved that issue very well. Now we are saying if you simply pack and put your name and standardise it, we are not going to charge you 5 per cent (GST). But if you are going to claim IPR (Intellectual Property Right) for it, then we will charge you 5 per cent. If you want to protect your brand and say that nobody else can imitate my brand – whether you are registered or not, under the common civil law you get the protection if you have used it for a long time. For example, if you start a brand of say Bandhansarees and use the brand for one year, thereafter if anybody tries to imitate that brand then you can sue that (person/company), without even registering the trademark. That’s why we said, that the company itself has to declare that whether it wants patent protection for the brand – then they have to pay 5 per cent GST. If it doesn’t want patent/IPR protection, it has to write it on the package and will be charged zero. So the government is in favour of food safety. It is always better to promote packing, standardising and grading of food products.
What are the plans to improve taxpayer experience on the GSTN portal?
They are trying their best every day and it is improving every day. They are trying to make it more user friendly. It is a part of learning and based on the user experience they are trying to improve it everyday.
Is it too early to make an assessment on the inflation impact of GST?
So far, we have not seen any inflationary pressure. And we have not received many complaints of profiteering as such.
What has been the most unexpected thing that you encountered and what has gone really smoothly?
Transition problems remain and people know about it. Initial hiccups were expected and those are to be solved by experience only. Some of the things we couldn’t have visualised at all, so those things we realised only by experience.
Would you expect growth to perk up in the coming months?
Yes, it (growth) will be very good because now the restocking has happened. And because of the festival season, it (the GDP number) should be better now.
What about the experience of manufacturers in pockets such as Surat?
Their only problem is that earlier they were not in tax net, now they are in tax net. The problem of all others is the same, problem of small scale industry is common. But the main items of Surat, textile fabric, they were not in tax net either excise or VAT, and they are now in tax net. That’s the reason they seem to be unhappy.
Will there be an increase in the tax base due to GST?
It will rise in future, possibly in the next year. Right now, we are watching but once things stabilise, the tax base will increase. In the current year, we expect a breakeven but the base will rise in the forthcoming years.
Do you have any message for people facing problems in transition to the new tax regime?
In transition, problems will be there but as long as the GST Council and the government are open to suggestions, as long as they are continuously giving relief to people for whatever problems they have faced…as long as that process of adjustment is taking place regularly, people should not worry. But it’s a great thing for the country in the long run and we should stick to that commitment to GST.
When do you expect transition issues to be resolved?
I hope within a year, transition problems will be over. After one year, we will see the real benefits of GST for everybody, even the vyapaari (trader) will feel it’s very simple. Right now, the fear of unknown is also there plus it’s a new learning experience for the tax practitioners.
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