As GST enters sixth year, a time for evaluation and reassessment

It was a significant enough milestone for PwC India and CNBC-TV18 to bring together the country’s leading policymakers and industry honchos for an in-depth analysis of India’s most major tax reforms, which has altered the revenue compliance structure like never before, ushering in cooperative federalism with the participation of states, in its truest sense.

Those interviewed by experts from the PwC and the CNBC-TV18 network headed by star anchor Shereen Bhan, included TS Singh Deo, Chhattisgarh’s Health Minister, KN Balagopal, Kerala’s Finance Minister, Manish Sisodia, Delhi’s Deputy Chief Minister and Mauvin Godinho, Minister from Goa, all of whom are part of the GST Council.

Adding heft to a summit of this standing were the Union Revenue Secretary, Tarun Bajaj, who offered profound insights into the working and implementation of the GST and Vivek Johri, Chairman of the Central Board of Indirect Taxes (CBIC), government’s tax policy expert at the highest level.

No understanding of working of the GST mechanism can be considered complete without those who man the wheels and the corporate chiefs, who have to ultimately ensure that money continues to go into the government’s rather vast coffers.

To that end, the list of speakers was sparkling: from Manish Sinha, CEO and EVP – Services at GSTN and DP Nagendra Kumar, Member of CBIC to Ajay Agarwal, Global Head, Tax at Vedanta; Pramod Jain, Head Enterprise Risk Management at Flipkart and Pratik Jain, Partner at Pricewaterhouse & Co LLP.

Sanjeev Krishan, Chairman, PwC in India, set the ball rolling when he said that GST had impacted price points and supply chains in a way that was unthinkable before. ``More than a billion dollars came into the warehousing and logistics industry, post the GST,” he pointed out.

In an invigorating panel discussion entitled Rates, Rules and Future Challenges, Pratik Jain, Partner at Pricewaterhouse & Co LLP, began by asking DP Nagendra Kumar, to crystal gaze into the future about the `big ideas for GST’.

In Kumar’s words, the way ahead idea was to simplify tax procedures, streamline mechanisms whereby everyone paid up as a self-assessee, improving compliance and clarify those grey areas where little bottlenecks persist. He also added that the GST is no longer only a central project and GST Council, which represents the states, has a very important role to play.

Manish Sinha, CEO and EVP – Services at GSTN, reflected on the use of artificial intelligence (AI) to streamline data for making tax collection more effective.

Ajay Agarwal, Global Head, Tax at Vedanta, pitched for including oil and gas into the GST ambit.

Pramod Jain, Head Enterprise Risk Management at Flipkart, spoke for small sellers aligned to them, who appeared reluctant to sign up with the GST, but agreed that the GST Council, which has held 47 meetings to date, was sensitive to their evolving needs. He also made a fervent plea for transferring inter-state credits so that capital is not blocked.

To be sure, there are several unfinished agendas, with respect to rate rationalisation and compensation to states, among other issues.

TS Singh Deo of Chhattisgarh said that GST will have to be rationalized further and brought down to two or three slabs. ``We cannot continue with 7-8 slabs,” he told CNBC-TV18.

Minister Balagopal from Kerala said that compensation to state governments needs to be extended, as 64% of GST collections, as per the 15^th Finance Commission, are going to the Centre. States are struggling and asking for more central assistance, he said. Goa’s Godinho was, however, hopeful that despite the initial hiccups, GST was on track.

Responding to what state government representatives said, CBIC chief Vivek Johri, believes that the use of technology will allow the government to plug leakages and push up GST collections. ``There are no fundamental design issues with the GST, but rate structures are a concern, inverted duty structures are a concern, nut just from the revenue point of view but also from economic logic,” he said in the interview, accepting that robust grievance redressal mechanisms have to be in place to further streamline the system.

Union Revenue Secretary, Tarun Bajaj, said that GST went up by 30% in the last year and indirect taxes grew 20% last year, making revenues very robust. According to him, expenditure will increase because subsidies on good and fertilizers are going up, but eventually, the increased revenues and increased expenditure will balance themselves out.

In his estimate, since the revenue intake was ₹ 1.51 lakh crore in the first quarter of this financial year and if we can sustain it in the coming quarters and reach a figure of ₹ 1.55 lakh crore on an average, ``I would say that the CAGR on GST will be 12% or thereabout, our target being 14% or so. With more revenues coming in, even the states will be satisfied, leading to a much lesser number of slabs,” he said.

Having said that, the Revenue Secretary also had a word of caution: there are new surprises that keep coming up, as was evident in the last two years, so due care needs to be taken.

``The last couple of years, there were no revenues coming, expenditures were going up and we didn’t know where the economy would go, shrunk as it was by almost 7% in the first year. But we have overcome that. Last year has been far better and we are optimistic about the economy,” Bajaj added.

On GST and rate rationalization, he said that ideally there should be two GST slabs, but the situation is far more complex, and more assistance is needed by those who specialize in tax structures to arrive at a mean, which is acceptable to most people.