No GST On Petroleum As Of Now, Says Union Finance Secretary Hasmukh Adhia
In an exclusive interview with Suman K. Jha of BW Businessworld, Union Finance Secretary Hasmukh Adhia says the far-reaching reforms in indirect taxation actually trundled in without the anticipated side-effects, like an initial drop in revenue or an uptick in inflation
It has been a year since the Goods and Services Tax (GST) was rolled out. In an exclusive interview with Suman K. Jha of BW Businessworld, Union Finance Secretary Hasmukh Adhia says the far-reaching reforms in indirect taxation actually trundled in without the anticipated side-effects, like an initial drop in revenue or an uptick in inflation. Fuels, though, he admits, are likely to stay out of the ambit of the GST for a while.
How would you describe the journey of the GST since it was rolled out a year ago?
It’s been hectic, but rewarding. The challenge of coping with the initial glitches and removing the information gap among business people - that was something we had to cope with, but it was very exciting to do so. And at the end of the first year, we find that the results have been very, very satisfying.
Could you enumerate some of the satisfying results?
Well, first of all, we would normally expect three things to happen when GST is implemented. The first is the GDP growth rate going down, which is the experience in many countries. The second thing is, inflation going up, which is our second worry. The third is that (the government’s) revenues may decline, because of the new system of taxation. But we are happy that in India, none of these things have happened.
There is absolutely no impact on inflation. The GDP growth rates of the last three quarters of 2017-18 are absolutely on the rise. This year too, expectations are of a rise (in the GDP). And finally, revenues have not been too bad. The average was said to be 12-13 per cent (higher) compared to the pre-GST period last year - so that’s not so bad.
And what have been the biggest lessons from the GST rollout?
There are a lot of learnings, but one important learning is that in spite of whatever preparations you make, you cannot completely rely on the technology. Technology can sometimes fail you at the last moment. So one has to keep a tab on that and always keep an alternative plan ready.
Going forward, what are the core challenges?
There are no major challenges as such, but the future agenda would be to implement the new system of filing returns –to make a very good software for it –to have it tested very well by people and business people and to then, implement it. That is the top priority. The second thing is, there are huge changes which are required in the law, which we ought to do as early as possible.
There has been some talk of doing away with the 28 per cent slab of the GST, by even the Chief Economic Advisor. What are your thoughts on the issue?
Well, it’s not possible immediately. There is a need for rationalisation of slabs. But it can only happen over a period of time, not immediately.
Maybe one year down the line...?
I don’t know. It depends on the revenue buoyancy.
Could we see some movement towards reducing the number of slabs?
That’s what I said. Rationalising of slabs and reducing the number of slabs is one and the same thing. So, it’s not possible immediately. We’ll have to wait and see.
Glitches in GST refunds have adversely impacted exporters. Do you think this is all a thing of the past?
We have already cleared about Rs 38,000 crore of refunds. Now what remains is only 10 per cent. That’s it. Big figures on refund are a thing of the past now. They (exporters) are already in the net and whenever there are any issues, they are interacting with us. I don’t think it’s true that they are still not fully integrated.
There were issues with the textile industry, which we sorted out immediately. We made so many changes in the textile sector, in the diamond cutting sector and a lot of other sectors too. So, now they’re fully on board and even if there are any more issues, we can always look into them too.
What about the micro, small and medium enterprises (MSME) and the real estate sector?
The MSMEs also realise the benefits of coming into GST now and because they are formalised, because they pay regular tax and because they have a turnover record, now it’s become easier for them to take finance from banks. So, some of the MSMEs have really told that us that they have benefited out of this. And our rate of taxation is not wild enough to affect the real estate sector.
But yes, there were certain real estate projects that were in the pipeline and those were the ones in which input tax credit was not available prior to GST. They say that was the time when most of these projects were finished and now only the remaining part of the projects are to be completed.
So now, there is no input tax credit availability (for such projects). So for transition projects, there was a little bit of an issue. But there too, we have clarified that proportionately you (the real estate sector) can take (input tax credit) now.
Are you satisfied with the revenue collections?
So far yes. But we need to do much more.
What are your targets for the next quarter or the next few months?
We should be getting at least Rs 1 lakh crore per month on an average, which should be about Rs 12 lakh crore per annum – at least for the 2018-19 gross.
What about compensations for manufacturing states?
They have been given (compensations) very regularly. They are not suffering. We kept our commitment of a 14 per cent growth rate - we are giving it to them.
Will we see ATF (aviation turbine fuel) and natural gas in the GST net soon? You have spoken of this. Natural gas and aviation turbine fuel are the first two candidates for the GST net, which can be looked into, but this is for the GST Council to decide.
So, is this on the agenda for the July 21 meeting?
No, the agenda has not been finalised yet. We will see.