Goods and Services Tax (GST) is again in news amid ongoing Covid-19 outbreak and its wider impact on economy and society. The Centre is hinting at further slashing GST rates. However, it’ll be subject to certain conditions as the government wants to enhance the tax base in the country.
Dr Ajay Bhushan Pandey, finance secretary, Ministry of Finance, said that GST rates can be reduced further if the tax base increases. “Once the tax base increases, if we are able to enforce our tax laws, and everyone pays taxes properly there will be definitely scope for further reduction of taxes,” he said.
More than 1,300 goods and 500 services are under four slabs of GST. The tax rate of 5%, 12%, 18% and 28% are applicable under the four slabs. This apart, the tax on gold is at 3% and rough precious and semi-precious stones that are placed at a special rate of 0.25% under GST.
What happens if the Centre enhances the turnover limit for the registered dealers? If the annual turnover limit is doubled to Rs40 lakh, then it’s estimated that 60 per cent of the registered dealers will be out of the tax purview. However, it’ll have negligible impact on tax revenue for the Centre.
As on March, there were over 1.2 crore registered dealers including 45 lakh reporting around Rs 20-lakh turnover and 10 lakh dealers with turnover upto Rs40 lakh. on an average, over 20 lakh dealers file returns with no tax, while 17.10 lakh composition dealers pay around Rs600 crore to the Centre.
Under composition scheme, the dealer needs to file quarterly returns. There’s a uniform rate of one per cent (0.5% Central tax plus 0.5% State tax) on composition scheme for dealers and manufacturers. Manufacturers under this scheme earlier pay two per cent (1% Central tax plus 1% State tax) of the turnover.
Dr Pandey said, “we are quite aware of this and we are undertaking the exercise. The ultimate aim should be that we collect minimum taxes at minimum rates. Government should collect taxes which are absolutely necessary and to that extent we need to increase our tax base.”
The Government is also working on reducing the number of forms under the GST. He said that there were 495 forms in the pre-GST era with 17 different taxes, which were levied by various states. “After the introduction of GST, the number of forms has have reduced to 17-18 and we want to further cut down the number of forms in GST.”
He added that with IT-enabled platforms, there is no inspector raj now, and GST regime has become faceless.
Elaborating on the new measures undertaken for income tax assessment, including the faceless assessment of taxpayers, he said that the Government is working on promoting self-compliance. He added that Government is also working on providing full tax profile for each taxpayer. “We have all the information and if it can be shared in a secure manner, protecting the privacy of the individual, this will help also help in securing loans from banks. The entire digital exercise is being undertaken across various government departments. We are making all that information available and providing it to each taxpayer,” added Dr Pandey.
He also said that all the information was getting integrated for the benefit of the citizens, including ease of doing business, ease of living and is also enhancing our capabilities.
Stressing on the importance of digitization, Dr Pandey said that “India is the only country to have Aadhaar, Aadhaar-enabled payment system, direct benefit transfer scheme and UPI payment scheme. “Use of digitization in governance has improved our speed, effectiveness, efficiency and capabilities.”
Dr Pandey noted that in last three months, the total Aadhaar-enabled transaction has crossed Rs 50,000 crore and UPI transaction has taken over debit card transaction and cash withdrawals.
Highlighting the revenue trend and the potential of the Indian economy, Dr Pandey said, “all figures are giving an encouraging signal that the economy is coming back on track sooner than what was being anticipated when the lockdown started.”
Dr Sangita Reddy, president, FICCI, said that digital has become the new norm in the post Covid-19 world. The Covid-19 has disrupted the global economic growth, but one of the blessings in disguise has been the boom in digitization. It is time to unleash digital reforms even further and leverage the efficiency gains through digital adoption for reviving and accelerating India’s economic growth. Let us collectively believe in the power of India.”
Mr Sunil Sanghai, Chairman, FICCI National Committee on Capital Markets, said digitization was not only going to improve the governance but will also reduce the cost of governance.
Meanwhile, traders body CAIT urged the government to lower GST rates on various products, including auto parts and aluminium utensils. CAIT also suggested a review of items placed under different tax slabs under GST as many of them are overlapping.
“Various items like auto parts, aluminium utensils etc. are not of luxurious nature (and) should be taken out from 28 per cent tax slab,” CAIT said in a statement.
The trade body submitted a White Paper on GST to Finance Minister Nirmala Sitharaman, in which it emphasized the need to streamline the GST slabs and ensure that as a matter of policy, the tax rate on a raw material is not more than the tax rate for the finished goods.
The traders’ body has also urged the Union Finance Minister to form GST Lokpal in each state and at the Centre so that a forum is provided to all traders to redress their concerns.
CAIT Secretary General Praveen Khandelwal urged the Minister to simplify Form GSTR 9 and 9C as it demands various information which were not prescribed earlier and hence traders are unable to comply with the same.
In its White Paper on GST, the CAIT has raised many issues including advance ruling, reverse charge mechanism, rectification of GST returns, that the liability of paying GST should be devolved on the seller only and no action should be taken against the buyer, clarification of jurisdiction of CGST & SGST, HSN code issues, abolition of Form ITC-04, and so on.
The writer is a business journalist with 27 years of experience