The government is willing to look at all issues to reduce pain points in the Goods and Services Tax and will take them to the GST Council, said Revenue Secretary Hasmukh Adhia. In an interview with ET, he said there is scope for rationalisation in the GST structure once revenue picks up. Edited excerpts.
The finance minister has talked about reducing the tax burden for the small-scale industries sector. What can be done?
The key issue in the MSME sector is that of compliance. There have been initial hiccups due to new technology and new type of returns, something they were not used to. The new tax presents a new learning for tax practitioners as well, which is posing difficulty. I would think much of these are initial hiccups that would soon get addressed. The GST Council would be looking at what can be done to give them some relief.
Is there a case for raising the composition limit to make it easier for small businesses?
It may be discussed because when we are looking at the problems of the small-scale industry and how to find a solution, then this may come up as one of the options. But, ultimately, the Council will decide.
Do you see scope for rationalisation for rates? Goods in same HSN (Harmonised System of Nomenclature) are also on different rates…
We should do it, but only after seeing revenue trends. Rationalisation leading to gravitation to standard rate of 18% can result into less classification disputes.
This government laid a lot of emphasis on ease of doing business, including in tax procedures. But there is a growing sense in the industry that GST has not taken into account some of the steps taken earlier…
We are learning from experience. We would also like to carry out an indepth survey to identify the difficulties and pain points on the compliance side, which are seen as a burden by the industry. The government and the GST Council would be open to the idea of reconsidering some decisions. But when people talk about ease of doing business, one must not forget that prior to GST, industry had to comply with 10 different taxes and a separate tax authority for all those taxes. But, nevertheless, if we find any practice that is obnoxious and not exactly taxpayer friendly, we would be willing to relook at them. We should make them taxpayer friendly, online and simple.
Do you think the filing process is the only issue? We are at 100 days now. Is there a need to revisit some provisions?
Every single law, rule has been debated in GST Council meetings. But some things are known only once they are put to practice. There can be issues, but at that time, correcting them is more important than blaming anyone. As long as the government and the GST Council are open to changes, one should not worry. Everyone had expected some discomfort in transition. It happened when VAT was implemented. We have responded to those challenges.
There is a view that people are reluctant to pay tax…
That must be the fear. GST is a selfpolicing system. Unless you report your transactions, your subsequent buyer also cannot.
There is a fear among traders that income tax will open past assessments once they get into the GST system. There have been verbal assurances, but they don’t seem to have helped.
If such a feedback has come, we can look at it. But I am not sure if such an assurance can be given legally.
Are you happy with the revenue trends of GST?
…much of the cash collection is in form of Integrated GST. IGST has to be apportioned. We are hopeful that over a period, this trend will change and more of cash payment will happen in CGST and SGST rather than IGST. Moreover, July and August are some of the lowest months in terms of sales —something that has been observed in VAT as well as excise duty collections. As festival months come, things will improve.
There is some indication that net taxes the Centre has received under GST are very little after the states’ share and compensation cess and there is pressure on the Centre’s revenue. Is that the case?
It is too early for me to say we are going to lose. Compared to SGST, the revenue in CGST is less, but that is partly because people have used the transitional credit, which was larger for the Central government. For example, last month some `60-65,000 crore was claimed by way of transition credit, then again, next month about `18,000 crore was claimed.
Do you think by the third month this transitional credit will be out of the way?
It has begun to come down. For states, the transitional credit, it is much less. That is why states are more comfortable in terms of SGST income.
Are the Centre’s finances coming under any pressure due to GST?
We will have to see at least four-five months cycle because the trend is changing now. For example, in the first month, more of payment was in IGST as goods are taken inter-state, but when the goods are sold again the CGST/SGST liability comes. And now in October, more payment is coming in CGST and SGST than IGST. The IGST credit will now be used and that is how it will happen. Also, right now we are only depending on the taxpayers – 3B is a self-assessment. We are believing the sales and credit number but subsequently when GSTR – one, two and three forms are matched, this may change and we may get some more revenue.
Has the package been finalised for exporters?
We want to find a way to remove the issue of blockage of funds. We have found some options. We will go with all the options to the council and it will take a call on whichever is best.
GST had caused some disruption. Have you got any sense from industry if things have improved?
It appears to us that there is some amount of normalcy because destocking had happened on the manufacturer side but now restocking has started.
There is some concern on the reverse-charge mechanism of levying GST… this is the main clause under which people will not be able to hide turnover. It is the crux of GST- Section 9 (4). GST Council will have to take a view. There is misunderstanding as well.
Some people believe they have to pay tax immediately, but credit will come later. This is not the case. You get the credit in the same monthly return in which your output tax liability under reverse-charge mechanism arises.