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NEW DELHI: On the occasion of the first anniversary of the implementation of the goods and services tax in India, Finance Minister Arun Jaitley said that the government has managed to make the slightest reforms in the country. At the same time, he hit Congress and his leader Rahul Gandhi for criticizing the tax system repeatedly. In a point-by-point rebuttal on issues like the use of a single installment of GST for India or to bring petroleum products into the GST, he criticized the opposition for have targeted the Center.
Here is Jaitley's response to the "deeply flawed" opposition:
It has been a year since the country switched to a new system of indirect taxation – the goods and services tax. A single tax replaced seventeen taxes and several taxes imposed by central and state governments. This obviously required all the chances of filing multiple returns, having an interface with several inspectors and valuation authorities, are experiencing the cascading effect of having to pay taxes even on the already paid tax component, having to pay taxes. Taxes separately in each state when movement of goods has occurred, suffer the disproportionate delays of multiple checkpoints and obstacles, and get fed up with the tax system provides for steps on how to bypbad the tax system. The very basic idea of the tax on products and services was not original. He has been experienced in several countries of the world. The Indian model had to be designed taking into account several facts. An indirect tax, unlike a direct tax, is regressive. In a country where different slices of people with different payment capabilities, everyone pays the same tax rate, the rate can be different for the rich and the less wealthy than in the case of a tax break. direct tax. But in the selection of products that are tax free or less taxed, a differential could be made in a company like India. Secondly, India had multiple markets, each of which constituted a different market that needed to be consolidated. Third, the essence of Indian federalism had to be respected. India is a Union of States where the Union and the States must be fiscally strong. A weak Union is detrimental to both national sovereignty and growth, and weak states will not be able to secure development. India is not a confederation of states and, therefore, the strengthening of state revenues can not be done at the expense of central revenues. If the Union does not survive, what will happen to India, that is to say "Bharat" – The Union of States
The imperfect model of the UPA
My friends from the UPA and the Congress Party sometimes raise questions. Premiers were not comfortable with the idea of GST during the UPA period. The fact is that almost everyone wanted the GST, but no state was comfortable with the GST model of the UPA. There were two main reasons for this:
First, the UPA government lost the confidence of states, including the Congress ruled states. In a move towards the single tax system, the UPA has urged states to abolish the CST. He promised states that he would grant them compensation instead of the CST for a number of years. States acted accordingly, abolished the CST, and the central government owed the states several thousand crores in compensation for CST. When states required compensation under the CHT, the Center would look away. When I took over as finance minister in May 2014, all states, including the BJP-ruled states, said they did not trust the central government because what the UPA government had done. They will only discuss the GST if the previous compensation is paid. I conceded that the UPA disappointed the United States was unacceptable and in order to restore confidence, despite the central income pressures, I will clear the backlog of Central CST. I've, as a result, done that. CST compensation has been paid. States were then willing to come to the table to go further in the GST
The second reason the UPA failed in its efforts to enforce the GST was that each state feared that during the transitional period there is a loss of revenue to the states. How would states be compensated for the loss of income? Their request seemed logical but the UPA chose not to answer it. The amendment to the constitution proposed by the UPA provided no compensation for the losing state. Producer States such as Tamil Nadu, Gujarat, Maharashtra and Karnataka were particularly concerned. They had raised the flag "No compensation, no GST". Having brought them to the negotiating table on the basis of the payment of the CST, I agreed to pay the States, after discussion in the GST Council, a 14% increase in revenue for the first five years for any loss. of income. States jumped on this proposal and we managed to gain the confidence of the states in the promulgation of the GST. Our positive commitment to federal principles has been unambiguously established.
The Question of Petroleum Products
Rahul Gandhi and P. Chidambaram have repeatedly called for petroleum products to be immediately subject to the GST. When I talk to the congressional finance ministers in the United States, they do not seem ready to do that. But what was UPA's record of petroleum products in the GST? The amendment to the Constitution proposed by the UPA has permanently maintained all petroleum products out of the GST. Thus, until the Constitution is changed again (it is normally difficult to amend the Constitution), petroleum products would never be subject to the GST, like the UPA. Having won the confidence of the states, I used the inclusion of petroleum products as a matter of negotiation with the states while conceding the CST and the payment of compensation to the states. I have developed a formula that petroleum products would be included in the GST amendment to the Constitution, but the board can decide the date from which to import them into the GST. States have agreed. The UPA has maintained petroleum products permanently outside the GST. On the contrary, we reinstated them in the Constitution as GST taxable and can gradually tax the GST when the GST Council so decides. For that, I would continue to make my best efforts and hope that when states are more comfortable with the income situation, it would be the perfect time to find a consensus between them.
Experience after one year
The TPS was to be launched on July 1, 2017, Congress advised us to postpone it. A reluctant government can never make reformist decisions. We went from the front. At the initial stage, we set the first set of rates. A lot of applications started to come from the trades and the industry and as a result, we started to rationalize the rates.
The first meetings of the GST Board began to reduce rates where it was desirable. If we look at the entire basket of goods and services, the rates collectively today are much lower than under the previous tax system. With the cascade effect of the tax on the tax that disappears, the responsibility is in any case come down.
To develop a consensus, we adopted the constitutional amendment allowing the GST to unanimously. All legislations permitting the GST have been adopted unanimously. The rules were presented to the GST Board. They were approved unanimously. Until now, we have held 27 GST Board meetings where all decisions were made by consensus and unanimously. All rates are set by consensus on the recommendation of the Rates Committee. Whenever there are opposing points of view within the Council, a representative group of state ministers is formed to develop a via media and we try to evolve the consensus in one direction or in l & # 39; other. I realize that the delicate federal balance in India must be maintained. The GST Council is India's first experience in decision-making power based on federalism and cooperation. We can not afford to risk failure and, therefore, it works in such a way as to create the confidence of all States. Meetings have always been based on consensus. The only area where unanimity seems to be lacking is that of the television programs that some ministers give after the meeting, which may be necessary for their own political position. I am willing to live with the experience of a healthy and unanimous debate in the Council and a dissent event outside the Council meetings.
We had one of the most flexible changes in any of the country's most important tax reforms. All the checkpoints disappeared overnight. The input tax credit system ensures that disclosures are made. The GST has encouraged a huge voluntary tax registration. Detailed calculations done in this year's Economic Survey show that as of December 2017, about 1.7 million registrants were those who were below the GST threshold, but who nevertheless chose to be part of the GST. Similarly, more than 50% of those who would have opted for the Simplified Composition Plan chose to enroll in the regular GST system.
To ensure greater compliance, the e-Way bill was put in place. Once the reconciliation of bills started, the escape would become extremely difficult. The life of the appraised has become easier. He files his statements online and his interface with several authorities has disappeared. The return process is also simplified. The group of ministers has already developed this mechanism. The overall amount of the tax basket has decreased. As the tax base increases, our ability to rationalize taxes and slabs will increase further.
Very small businesses have been protected. Those whose turnover is less than Rs20 lakhs do not pay the GST. Those who have a turnover up to Rs.1 crore can aggravate their GST with a 1% tax payment on the turnover, and file a quarterly return.
One Plate
Rahul Gandhi advocates a single installment of GST for India. It's a misconception. Only one GST tranche can operate in countries where the entire population has a similar and superior level of payment capacity. Being fascinated by the Singapore model is understandable, but the profile of the population of a state like Singapore and India is very different. Singapore can charge 7% GST on food and 7% on luxury goods. Will this model work for India? Since the GST is a regressive tax, the poor must receive substantial relief. Thus, most food products – agricultural products and products used by AamAadmi must be exempt from tax. Some others must be taxed at a nominal rate. The others could be taxed higher. Eventually, as collections improve, many other items in the 28% category may eventually fall. Only sin products and luxury goods can remain there. According to the collection, there would also be an opportunity to merge some of the intermediate slabs, but for this we need to see the progress of the new tax system and the possible upward movement in the collections.
Tax Effect
The impact of the GST on direct taxes is already visible. Those who must disclose the turnover must now declare their income for income tax purposes. As a result, the collection of direct taxes has resumed according to initial indications. When we look at GST performance in the first nine months of July 2017 to March 2018, and add the total amount raised – CGST, SGST, IGST and composition – we will get the total amount from the GST collection. In the first nine months, the total amount collected is Rs.8.2 lakh crore- Rs.11 lakh crores if annualized, which gives an income growth of 11.9% or a tax increase of 1.22, which has historically been very rarely achieved for indirect taxes and hope that tariffs are lowered for consumers. As more and more anti-avoidance measures are put in place, fiscal buoyancy will increase further. The GST will strengthen the country's tax base in the medium term, which will represent 1.5 percentage points of additional GDP.
Today, states are getting a 14% increase in the 2015-16 tax base through the cessation of compensation. Eventually, when the frozen IGST is gradually released to the Center and to the states, even without compensation, most states would exceed the 14% growth target. It should also be borne in mind that even today, the obligation of compensation is minimal and that the current level of compensation of about 7,000 rupees per month is more than enough to ensure that states are compensated for any loss of income. Significantly, the GST broadens the tax base of less-developed consumer states, giving them more resources to devote to development purposes.
The base of the indirect tax is expanding. There is a continuous flow of goods and services across the country. The "Doing of Business" has become simpler. The switchover took place without major disruption. The computer system after the first malfunctions works much better. For all of this, I wish to express my sincere thanks and thanks for the efforts of the Secretary of the Treasury, Shri HasmukhAdhia, all the CBIC officers and the Center's tax and tax services and all the states, GSTN officials and Chief Economic Adviser Arvind Subramanian
There is always room for improvement. The main areas for future action will include the simplification and rationalization of the tariff structure and the introduction of more products into the GST. I am confident that once the revenues are stabilized and the GST settled, the GST Board will carefully consider these issues and act wisely.
The biggest success of the GST has been that the GST Board has proven extremely effective and powerful. federal institution. The finance ministers of the states have created the history of federal governance. I have indeed had the privilege of having the cooperation of each and every one of them. Thank you, the finance ministers for collectively making the GST a historic transformation and a worthwhile experience for the country.
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