Soon, Only 2 Tax Slabs Likely For GST

Published: November 15, 2017 11:55 IST
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Sushil Kumar Modi is Deputy Chief Minister of Bihar and member of the GST Council.

(As told to NDTV's Manish Kumar)

GST is not a pain for consumers and customers. As far as consumers are concerned, we want them to go into the nitty-gritty, the details of the GST - on most of the items, the rates have been reduced; on more than 80 per cent of the items, what was the earlier rate has come down from pre-GST to post-GST. So as far as the consumer is concerned, they go to a store and they purchase any item and possibly pay less now for it, but yes, visibility is a problem.

For example, when you go to buy a bag of cement, it shows 28% GST and the customer thinks that it is 28%. Earlier, it was 31%, but the excise part was not visible and he was paying only VAT on a bag of cement. So as far as the consumer or customer is concerned, the problem is that in many cases that benefit is not passed on to consumers. If there is a gap of 3%, 4% of tax now, it should be passed onto consumers. In many cases, it has been passed on by big companies like Unilever and some others, the big multinational companies, so as far as consumers are concerned, I don't think there's any problem - the only problem is of optics. When they go to buy something, they see 18%, they react why it is 18%, though they don't understand and we could not explain to them that this 18% includes excise that is not visible. So in the last meeting of the GST Council, we have tried to resolve the issue of optics also; so many things, which were in the 28% slab, those items have been reduced to 18%. Like shampoo, like deodorants, like marble, granite, chocolates and other things.

So from the point of consumer or customers, the optics is one issue, so we have suggested in the last meeting that for B2C (which means for Business to Consumer), prices should include all the taxes. So we have suggested - and we'll soon decide about this issue - that in the MRP of an item priced let's say lower than Rs 10,000 or 15,000, the breakup of taxes will not be required, only the final value that includes taxes also will be visible.

So two issues, optics - the visibility of the excise duty which was not there earlier - and passing on the benefit to consumers, these two are the issues that we will work to resolve next.

While on many items, the prices have come down, the difference is only 2-4%, so the customer may find it tough to recognize that the item is now cheaper. Now there is also a tendency of profiteering, so an anti-profiteering committee has been formed. From Kerala, that committee is seeing more than 150 complaints of the benefits of lower taxes not being passed on to customers, so in every state, an anti-profiteering committee has been formed.

In the last four months, in each and every meeting, we have brought 30-40 items from a higher slab to a lower slab, so still, there is scope for rationalization - but not much, because after this Guwahati meeting, more than 175 food items have been transferred from 28% slab to the 18% slab. Remember that for 8-10 years after the implementation of VAT, we were still rationalizing tax rates, but I think 80% of the issue of rationalization has been taken care of in the Guwahati meeting.

If it's 'Gabbar Singh Tax', then why has it been implemented by the states that are ruled by the Congress? They could have boycotted the GST Council. Each and every decision of the GST Council is taken with the consent of Finance Ministers from the Congress and Trinamool, so they are talking in one language in the GST Council, and making different statements outside for the consumptions of the public or electorate. If it is 'Gabbar Singh Tax', the Congress should walkout (of the council). Have they done that?

In the entire 170 or 180 countries which have gone through GST, only Singapore has one slab of 7% and it is a very small country, so it can't be emulated. Even in the European Union, there are more than five or six rates. France has different slabs of 19-25%. But as and when we will observe revenue buoyancy, we will act. 

So ultimately, the country will move to a two or three slab structure, but it will take much more time. I think slowly, when the system of GST stabilizes and when the revenue buoyancy will be there, then we can take a call slowly on moving some items from 28 to 18% or on having only two slabs: 6-7% and 15% - but all these things will take a much longer time.

Also, remember, there were 37 different entities (29 states plus Union Territories) and each of these followed a different kind of taxation Also, many of the southern, western states were very advanced with IT (Information Technology) - in states like Gujarat, Karnataka or Maharashtra, 80% of things were online . But in states like UP, Bihar, hardly 50% things were online, other processes were being handled manually.

Now, we have merged 37 entities into one single entity and we have tried our best to make it as simple as possible, but still, there are teething problems and as you proceed, you confront issues, so we couldn't have visualized all possible complications before the GST was rolled out on July 1.

Once you confront the system and get into the habit and then you file 5, 6 returns, you come to know the system and then it becomes easier. Those who don't know about using computers, it's complex for them; those who don't know how to use mobile phones, it is complex for them; but once you start using it, it becomes simpler. 16 types of taxes of states and the centre have been merged into one tax of GST. Though there may be different slabs, there is one tax. 

Tax evasion will get much tougher. I met a pharmaceutical company in Patna, they said our growth after the GST is 40%. I asked how did you manage 40% growth. They said illegal goods that used to come from other states have fallen, and we are billing everything now, so our revenue growth is 40%. The new system will disincentivize evading taxes. I have seen that the new generation entering business, they don't do this kaccha-pakka business, younger people want to do fair business. A good number of people who were evading taxes earlier, now it will become a problem for them, because if they pay GST, they will have to pay income tax also. In the earlier VAT regime, it was difficult for IT authorities to see how much turnover is there, but now IT authorities or anybody can see details through a PAN number. This is a PAN-based system.

Infosys says they have put their best talent, best manpower, a good number of their officers and their IT experts on the online filing system. The IT system is so robust that in a single day, 13 lakh returns were filed, and in one single hour, more than one lakh returns were accepted by this IT network. Just remember that a large number of tax payers were not in the habit of filing returns through internet or through computers, The IT system is so vast; every 15 days, we are reviewing its functioning. We are flagging what we think is lacking - there should be a provision of preview, edit, better offline tools, but these are the teething problems.

The system has started stabilizing. A deadline can't be defined, but I think by the end of this financial year, 60-70% things will be stabilized. VAT also took a long time to stabilize. As people will get into the habit of dealing with GST and as the system gets simpler, businessmen will back it more and understand it is good for them and for the nation too. 

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

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