GST not disruptive, higher revenues to aid rate rationalisation: Jaitley

GST not disruptive, higher revenues to aid rate rationalisation: JaitleyNewDelhi: Union Minister Arun Jaitley has said rollout the Goods and Services Tax (GST) has not been disruptive in the last one year and exuded confidence that higher revenue collections would enhance the capacity of the government to rationalise tax rates going forward.

Speaking on the occasion of the first anniversary of the GST rollout, the minister stressed that the best in terms of the impact of new tax regime on the GDP growth, ease of doing business, expansion of trade and industry, Make in India initiative and promoting honest business practices was yet to come.

He also dismissed the idea of a single rate GST being advocated by Congress President Rahul Gandhi as flawed saying that it can only work in a country where the entire population has ‘similar and high’ capacity to spend.

Jaitley, who is recuperating from a kidney transplant, joined the ‘GST-Day’ celebrations through video conferencing.

GST which subsumed 17 local taxes was rolled out on July 1, last year. Currently over 1.14 crore businesses are registered under the new tax regime.

Observing that countries implementing GST had witnessed major disruption, Jaitley said he too had felt that it would cause disruption in the Indian economy.

I myself used to use the word disruptive when it came to major reform like GST because it takes time to settle down. But after one year of experience I’m not too sure whether I can use the word disruptive for GST reform. The smooth manner in which the changeover has taken place is almost unprecedented anywhere in the world,” Jaitley said.

He said the the economy has seen “effective gains” of GST roll out in the last year. “…The best of GST, in terms of its contribution to society, is yet to come, Jaitley said.

In the current fiscal, mop up from GST topped Rs 1.03 lakh crore in April, Rs 94,016 crore in May and Rs 95,610 crore in June.

As the tax collection goes up, the capacity to rationalise the slabs, the capacity to rationalise the rates, also will certainly increase. And therefore that capacity to rationalise will increase once the total volume of tax collected significantly increases, Jaitley said.

Stating that the input tax credit itself is an effective route for ensuring that people make their disclosures faster, Jaitley said once you have a more efficient tax system it will ensure that evasion does not take place.

The e-way bill has already been implemented and once the invoice matching comes in, evasion and detection of evasion itself will become far simpler itself, he said.

In an article titled ‘The GST Experience’ on completion of first year of the roll out of the new indirect tax regime, he said the key areas of future action will include further simplifying and rationalising the rate structure and bringing more products into the GST. “I am confident that once revenue stabilises and the GST settles, the GST Council will look into these carefully and act judiciously.

He said since GST is a regressive tax, the poor have to be given a substantial relief, he said, stressing that most food items agricultural products and the Aam Aadmi products have to be tax exempt while some others have to be taxed at a nominal rate.

Rahul Gandhi has been advocating a single slab GST for India. It is a flawed idea. A single slab GST can function only in those countries where the entire population has a similar and a higher level of paying capacity.

Being fascinated by the Singapore model is understandable but the population profile of a state like Singapore and India is very different. Singapore can charge 7 percent GST on food and 7 percent on luxury goods. Will that model work for India, the minister questioned.

Jaitley, who was the Finance Minister when the GST was introduced, is currently minister without portfolio.

Addressing through the video conferencing, he said the goods which are currently in the 28 percent tax bracket, were taxed at 31-32 percent in the pre-GST era because of the cascading effect of various taxes.

“The weighted average of total taxation basket has significantly come down and therefore we are in the process of rationalising the rates itself,” he said.

He said despite challenges to the global economy, thanks to demonetisation and anti-black money measures, the GST impact on direct taxes was not fully visible last year and direct tax revenues increased 18 percent.

“The first quarter (April-June) of this fiscal shows that the advance tax payments indicates that the personal income tax collection, the gross figure, has increased by 44 percent and corporate tax by 17 percent.

“So the GST not only impacts the indirect taxation, but those who have to disclose their turnover now for the purpose of GST and necessarily to pay the direct taxes, so this net significant increase in the direct tax is substantially attributable this year to the effective enforcement of GST,” Jaitley said.

A study of first nine months from July, 2017 to March 31, 2018, shows that the combined total collection has been Rs 8.2 lakh crore. If this figure is annualised, then this figure comes out to be Rs 11 lakh crore.

“So in the very first year, where you had a lot of teething problems, where you were persuading a lot of people to join in, despite lowering taxes, has seen a 11.9 percent growth, which is a tax buoyancy of 1.22 percent, which was unknown to indirect tax system in India,” Jaitley said.

Bureau Report

Be the first to comment

Leave a Reply

Your email address will not be published.


*