Thursday, June 08, 2017

GST Explained by the Revenue Secretary

In less than a months' time, the tax system in India will take a radical shift to a comprehensive Goods and Services Tax (GST) model. In most countries, GST is understood as a single indirect, comprehensive, broad-based consumption tax. In Singapore the GST rate is a flat 7% while in Australia, it is 10%. Other countries have a graded VAT system with different tax slabs.

The Indian model GST is going to be unique - and seems rather confusing. From 1 July 2017, we are going to have a GST with five different slabs, ranging from 0% to 28%. The norms for reporting and compliance too seems quite formidable. This impression is getting reinforced by 'expert analysis' on YouTube and the social media.

This was the background and context to a recent meeting organised by the Indian Express, to bring Dr. H. Ardhia, the Revenue Secretary himself, to interact with the pubic. It was a decidedly anxious audience  of about 400 people who assembled at IIC on 6 June, 2017.

It was a packed hall, ringed with people who could not find vacant seats. The two empty chairs on the stage were taken up Vishwanathan from IE, and Dr. Ardhia, who was described as a PhD in Yoga!

First came the big picture: The long legacy of Indirect Taxes (Customs, Excise Duty, Service Tax, VAT, Stamp Duty, Entertainment Tax, etc.,), how the division of responsibilities between the central and state governments had resulted in various inefficiencies, and how steps were taken to gradually move from VAT to a nation-wide, common GST system.

The total tax collection for FY 2015-16 was INR 14600 billion (Rs 14.60 lakh crore), of which indirect tax revenues was Rs 7.11 lakh crore and direct tax collection came in at Rs 7.48 lakh crore. In India, the ratio of direct vs. indirect taxes was 35:65 - just the opposite of what it ought to be, and the sheer absurdity of the fact that in a country of 1.2 billion people there are only 2.4 million people who earned an annual income of over INR 1 million!

A substantial part of the session was set aside for answering questions from the audience. Surprisingly there were hardly any long-winded queries - most of them were short and sharp, with matching responses from Dr. Ardhia, with a dose of good humor. At the same time, it was a bit disconcerting to note from the responses, that the Revenue-Secretary too was not entirely clear on how the government would cope with various interpretations of the GST Act 2017.

Starting from 1 June 2017, we are sure too see many months - and perhaps years - of GST-related turbulence and turmoil.


* Taxes to be subsumed in GST -

* (2017) - Dept of Revenue - collection during current year -
- 2011-12 Corporate tax 3.2 LCr -- Income Tax 1.7 LCr = Total 4.9 Lcr
- Customs 1.44 LCr -- Central Excise 1.4 LCr -- Service Tax 0.97 LCr = Total 3.9 LCr

* E&Y on GST Compliance -

* Global VAT / GST Rates -

* (2016) - Tax collection in 2015-16 exceeds target by Rs 5,000 crore -

* State Tax Revenues -
- Total for all states, 30,331 billion (30L cr)
- Top five - WBengal (4518b), AP+Telengana, UP, TN, Karnataka
- Kerala is at no.9 at INR 1382b

* (2017) Budget Explained --

* Revenue Secretary -
- Dr. Hasmukh Adhia

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