“There’s A Fear Of The Unknown”
With the country set for a July 1 GST rollout, the man driving the mission, Union Revenue Secretary Hasmukh Adhia, opens up in an exclusive conversation with BW Businessworld’s Suman K Jha, and says that there may be some uncertainty in the initial few months, with the people not having enough knowledge, but the situation will ease thereafter
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With the country set for a July 1 GST rollout, the man driving the mission, Union Revenue Secretary Hasmukh Adhia, opens up in an exclusive conversation with BW Businessworld’s Suman K Jha, and says that there may be some uncertainty in the initial few months, with the people not having enough knowledge, but the situation will ease thereafter.
Are we fully set for the historic GST roll-out?
Yes, we are fully set.
What are the final preparations that you have put in place?
We have to notify the rules in the gazette. There are 16 different rules approved by the council and we have to notify all of them in the gazette. The same rules will be notified by each of the state governments. We have to send it to them as well. We are in the process of getting the legal vetting of those rules done, after which the states have to receive. So, both the state and central government will do the notifications, same rule, same notifications are to be issued both under CGST and SGST.
There is a perception that the government is ready, but the industry is not fully ready. Would you agree with this perception?
That’s what they say! But, then the private industry is always more efficient than the government. So, we will expect that they will catch up. They have lots of resources. Unfortunately in India, there is a tendency to delay till the last moment. Even if it is delayed by three months, then also some people won’t be ready. So, we have to drive them to get ready now by giving a deadline.
You were closely associated with demonetisation. Do you expect any demonetisation like chaos in the post GST phase?
I don’t think there will be a chaos. Demonetisation affected everybody’s life, it was affecting quite a bit of population. In GST, we are only talking about 60-70 lakh dealers, that’s all. Of course, their lives will change because of the tax rates going up or down. Consumers might have some effect. But, in terms of disorder, there will be some or little pain involved for the first few months for which everybody has to be prepared. I won’t think there will be chaos; there might be some pain because everyone will try to find out, ‘what’s in there for me’.
There might be some problems initially because of the gap of information, but as soon as people start understanding and filing their returns, the confusion will be much less and there will be greater degree of satisfaction.
We did an all India survey of India Inc. and we uniformly found out that the MSMEs are just not ready for this transition.
Any transition is always resisted because there is a fear of the unknown. But, if you ask me, there is not much of a transition involved here. Even earlier, MSMEs filed all their returns online, whether it is excise duty, service tax or VAT. I can understand there was no excise duty up to Rs 1.5 crore, but VAT was there for everyone above Rs 10 lakh. In most of the states VAT returns are accepted online. So, they know the process, it’s just a question of understanding better.
You have also received representations from airlines, banks, pharma that they are not ready for the GST and have certain reservations about the July 1 rolling out of GST, they want more window…
That’s why we have given two months window. The tax will start and the first and second returns can be given in summary form. They don’t have to give us the invoice wise details. For July returns, we have given the time till 5th September so that they can get their system ready and put in all the invoices. That’s why we have given more time.
It was found out in the survey that among the large firms in India Inc. 54% feel that a robust GST structure is not in place yet.
They feel that, but we don’t think it’s true. We have put in a very robust GST system in place. All security features are put into place and one of the best IT companies of the world, Infosys is doing it. There is no reason to doubt their capabilities and it is in place. The only thing is that their own system may not be ready and the testing of their system with ours may not have been done. That’s something they should do, as we have given them extended period. There is more time available for them to have a greater comfort level.
It was found in a survey that supply chain management and training requirements are the biggest challenges. Would you agree with this perception?
Supply chain management is going to be easier now. I am sure all the logistics companies understand it better and are working on it and training people. There is no problem there; it is only a question of time. They have to do something to train their own people.
Many firms are yet to register on the GST network because they say that, ‘the website is not working’. Will it stabilize in the near future?
It is not a question of the website not working. There was a feature in the website that required e-signature which has to be verified through EVC, for which a passcode was sent to your mobile number which is registered to your Aadhar. Some people did not have the correct number given to Aadhar, they found it difficult. We are done away with the requirement of Aadhar verification and we are making it simpler when the registration opens. We will send the passcode on the registered number you provide to us and that will make it easier.
Those people who have to migrate from service tax or excise tax or VAT, in their case we are giving some more time. So, from 25th onward, they can take one more full month to migrate. Business will not be stopped. they can continue doing their business.
The same provisional ID that has been given to them will act as their permanent ID. You don’t have to change it. The only thing is that once you give your details and migrate, you will get a certificate of registration. Those who have not given full details, we will be dispatching them provisional certificate of registration.
Those people who are coming in the tax net for the first time, we will be opening the window again from they have time to register till 30th July.
Q10: What happens to the SMEs that are not able to register?
65 lakh have migrated. Those of the SME’s who have not migrated, they should migrate now. They have time till the end of July. For the new registrants, the permanent window will be open. But, those who are in business already should get registered before 30th July and get the registration number.
There is confusion about how to claim input credit particularly when the firms are sourcing from multiple vendors with different products at different rates. So, how will this calculation be made?
Everything will be done through computer; you just have to fill the form. You don’t have to do anything; the machine will do it for you. From 1st-10th, all dealers have to put in their invoice details and the purchase details will automatically come by the computer. It will be auto populated. Whatever purchases you have made will be shown in your purchase return and you will be able to get the input credit of all the purchases.
All invoices will be uploaded on the GST network, so there will be millions of invoices. Is the system capable of handling such volumes?
We are 100% capable. We have provided for double the capacity. But the bigger units which have got millions of transactions, their system is so prepared for synchronizing with GSTN that they won’t wait for 1st-10th of next month, their invoices will be uploaded daily. So the majority of big players whose vouchers are in millions, they will all keep coming entire month. 1st-10th all the small ones will upload their invoices. So, it will be distributed throughout the month.
How will the system of input credit work? How long will the companies particularly the exporters have to wait to receive input credit?
Input tax credit is given to you every month. You are talking about refund. In the case of export, 90% of the provisional refund will be given to you in seven days of filing your refund application. This is in the case of export.
Many products are still to be classified under the GST slabs. The conveyer belts used in factories are still to be classified under GST slab. So, how will the firms calculate it?
The final notification will contain all items of classification and not a single item will be left of. This will come off by the middle of next week.
There is lots of representation made to you by the automobile industry regarding hybrid cars at 43% tax rates and they wanted a revision in this. Is there a scope of revision in this?
GST council had discussed it briefly, but after that there was no further discussion. Now there is hardly any scope for further review except in the emergency cases where the council may have to review it.
You have toured the country in the last 60 days meeting the traders, industry associations and all kind of stakeholders. What is the overall feedback that you have received?
The feedback is that people do welcome such reform but they have a fear of the unknown in their mind. They are happy to be guided about it. We have decided that all the central excise, service tax and VAT Department office of state governments and all those offices will work as GST facilitation cells. Any small trader or any businessman can walk in to any of our offices and get GST guidance.
You think the teething troubles will be over in a few months?
Yes, there may be some uncertainty for the first few months because of not having enough knowledge. But, all the tax practitioners and GST assistants will help the people.