Bihar Deputy CM and finance minister Sushil Kumar Modi, a senior member of the GST Council and a former chairman of the empowered committee of state finance ministers on VAT, on the GST changes:
Earlier it was said that GST rates would be cut only after revenue stabilisation but now revenue considerations appear to have been kept aside.
Earlier, when middle-class consumers bought white goods such as TVs, washing machines, the component of excise duty was invisible to them. They were not aware about the GST rate on these goods. Now, under the GST, optics wise, the 28 per cent tax rate with CGST and SGST components, looked bad. So, there was a general consensus in the Council that the tax rate should be decreased. Revenues may be hit for three-four months, but after that they will start increasing.
Compliance levels have always been a concern. Was that not a concern for the Council before deciding to cut GST rates?
Compliance has been improving (under the GST). We are getting business intelligence reports and MIS (Management Information System) reports for model 2 states. The e-way bill system has also been rolled out. All these measures are getting reflected through improved compliance in states and are expected to improve further. With the recent rate cuts, the tax burden will reduce, sales will increase and, accordingly, the compliance by taxpayers will also increase.
Though revenue of states is protected through compensation for first five years, do you see an impact of the rate cut on the overall GST revenues, especially for states?
All states are earning well under the GST. Some level of revenue shortfall is being seen only for the special category (hilly and northeastern) states such as Himachal Pradesh, Uttarakhand, Jammu & Kashmir along with Punjab and Bihar, whereas GST revenues of other states are growing at about 15-20 per cent. In fact, overall revenue shortfall for states (against their protected revenues) has narrowed by 3-4 per cent. Till January, the overall revenue shortfall was at about 17 per cent, which has now come down to 13 per cent.