Thank you very much AIR. 8 years of Goods and Services Tax. - Part-1 Participants are Shishir Sinha (Economic Analyst) and Bala Nagendran D (All India Radio Correspondent) (Akashvani) We are going to discuss today how GST has evolved, what are its scope, how are we forecasting our economic progress with the implementation of GST. News Correspondent: First, we would like to speak on the evolution 2017 the GST has been implemented but that there was discourse of implementation of GST, could you trace us the evolution what has happened since 2017. Economist: During these eight years when we talk about GST which subsumed 17 types of taxes, Central as well as the State one, 13 types of CESS. So, from business point of view it’s a more ease of compliance because earlier you used to file a form for each of the tax. I mean the 17 taxes you have to fill 17 forms. Now you just have to fill one or two forms for the GST so one of the most important things is the ease of compliance from the business point of view. Now coming to the consumer point of view, that is the most critical part because earlier the regime of Central Excise Duty and the Sales Tax or VA, there used to be tax-on-tax. That means since a tax levied by central government on the production and tax levied by the state government on the sale part. That means whatsoever the price is fixed one. The centre will levy and over of that the state will levy. So that was a tax-on-tax system. Now under the GST what is the most important thing you don’t have to go for the tax-on-tax. There is no cascading impact of taxation. So, from the consumer point of view there is some kind of relief in that. The third and most important part is, we are talking about one nation, one market, one tax. Of course, there cannot be one rate, in a country like India, you cannot have a one rate of GST, because of the income disparity, because of the people who are in the poorer section or who are in the richer section, they cannot pay the same kind of taxation. That’s the theory of the taxes. But when we are talking about one nation, one market, one tax means somebody who is going to buy a car say in Haryana, and if he is living in Bihar he won’t have to pay more in terms of the taxes, he will have to pay the same tax whether he is in Bihar or in Delhi or in Haryana. Of course, there will be some additional charges of the freight rate but that’s not something which is going to harm the consumer in a bigger way. So, the three key things: Ease of compliance for the businesses No tax-on-tax for the customers One nation, one market, one tax That’s the key to the GST. So, this is how we track the GST during last 8 years. News Correspondent: Could you tell us how it has brought down the average tax, that’s the major point that has been highlighted across. Economist: Okay, let us take some goods like wheat and rice. That’s a very essential item for all of us. So, if you take wheat and rice and if you go to the pre-GST regime, there used to be a tax (I’m just talking about the lose item not talking about the prepackaged or labeled one). When we talk about the lose item there used to be tax something around 2.7%, under GST there is no taxon the flour as well as on the rice. Of course, if you are buying say packaged flour or packaged rice, you have to pay 5% tax that’s something different but for large number of customers who go for the lose flour and the rice they don’t have to pay any tax on that. Now, take example of electronic items, take the example of mobile handset (today India is a country where almost everybody has at least one mobile handset in his/her hand), earlier there used to the tax rate of 31.3% today the rate is just 18% on the mobile handset, so this is another thing. If you talk about washing machine, there is of course, 31.3% now the rate is 18%. Of course, the Air-Conditioner, the rate is 28% but we all know that air conditioner is something which is a kind of luxury item so if you take various category of goods as well as the services you will find most of the goods and services, the tax rate has come down. And that’s going to benefit the customers. So, this is how the GST has brought down the overall spending by an individual. (or the average tax). News Correspondent: Study of the Finance Ministry has revealed that at least 4% of the monthly household income has come down due to the enforcement of Goods and Services Tax. So, Mr. Sinha by what you have been saying apart from the average tax coming down, what are the other factors that has contributed to the reduction of household monthly income as well as do you think that the continuance of GST would help in further stabilisation which is paramount for the middle classes of our country. Economist: See if a business is fixing a price of a product and if he is paying more tax on the product he will take the entire tax from the customer but if he is getting the benefit of input tax credit which is a very critical part of GST. That means all the taxes which you have already paid will be deducted from the final taxes for businesses. So, if the businessman is getting the benefit but input tax credit but the tax incidence will come down for the business. And if the tax incidence for the business is coming down that means the price of the final product which also includes the tax may not go up. So, that is one area, that is one thing which we have to keep in mind. Of course, you can say that with the changing times the prices have gone up, because that will go up because the other cost has gone up. Vegetable prices has gone up, the land prices has gone up, bank interest rates have gone up, that’s a different thing, but if you talk about specifically about the tax, if the tax incidence is low, then the final product will also be not very expensive. And that is one thing which businesses would like to pass it on to the consumer because the businesses is not going to bear tax from his her own pocket. (1/2)

News Correspondent: When we talk about business, I’m here by to ask you on some sectors where GST has paved a role be benefitting them. One of them is MSME which is the backbone of our economic progress, and second one is logistics, so, first we talk about the MSME where GST roll out has a pivotal role. Could you highlight those things especially talking about the composition scheme as well as what are the benefits that the MSME has received. Economist: There are two parts to that one if you see the threshold of mandatory registration. So, in most of the states the threshold is 40 Lakh for goods and 20 Lakh for services. And in some states, it is 20 Lakh for goods and 10 Lakh for the services. So, if you see this kind of threshold that many of the smaller businesses may not be required to go for the GST registration. Still if they want to go for their registration just for the sake of the business because many of the large businesses ask for GSTN, so small businesses will go for their registration. Now getting a registration is not a very difficult thing it’s a completely online thing. And if you are not falling into any kind of risk profile, if your profile is not having any kind of risk, then you may not have to go for more and more rigorous check. So, that is getting a the GSTN registration is not very difficult thing. Number two, you talked about composition scheme. Under the composition scheme, what is the threshold 1.5 Crore, if the annual business income is 1.5 crore you can opt for composition scheme. Under the composition scheme, you have file returns just once in 3 months then the rate of tax will be lesser and number three you cannot collect tax from the customer because you just have to pay a minimal tax which is 1% and the 5%. So, all these things are going to help the smaller businesses to be part of this GST, and please remember when a small business or when medium sized business or even a tiny or the micro units are coming into GST fold that means we are seeing more and more formalisation of economy. On the one hand, when we have more and more formalisation of the economy, we will have clearer picture of the economy and at the same time these businesses units will be able to get loas from the organized sector if they are GST compliant if they are GST registered. That will also help them to access various sources especially the finance market in a better way. News Correspondent: In 2020-21, the revenue collection was around 11.3 Lakh crores with an average monthly collection of 0.95 Lakh crores. But in 2023-24 fiscal, it was impressive of 20.18 Lakh crores, so what does it imply? Is it implying that the people getting more money in their pockets because of the roll out of the GST and less complex indirect taxes or is there any other factors that are in addition to this? Economist: The most important thing is the compliance. I mean now evading the tax is not going to benefit. If you are paying the tax in an honest manner that is going to help you in a bigger way. And that is a sense business are getting. So, that is why seeing the compliance has gone up. Of course, the consumption also has gone up. Because of the higher compliance coupled with the consumption we are seeing very good growth in the GST Revenue. You rightly mentioned about 20 Lakh crore plus which we collected during the year 2024 and average monthly collection was 1.68 Lakh crores. And during this first quarter between April and June, the average monthly collection is 1.85 Lakh crores. And in the month of April the all-time high collection was 2.1 Lakh crores rupees. So, it is not just because of the consumption alone it is one of the key factors is the compliance. Businesses are getting ready to pay the tax provided they are getting good returns in terms of government support and in terms of support from various institutions. News Correspondent: I want to ask you about the logistics which is one of the primary concerns of manufacturing sector of this country as well as the business entities. How this roll out of GST has helped in ease of logistics in the country and how are we seeing the improvements? Economist: If you talk about the logistics cost, at this moment our target is to bring it down to the single digit. I mean sometime back we had 14% logistic cost of the total manufacturing cost, if you can take the number. So, if you have to bring it down to the single digit you need a streamlined structure, whether we talk about railway, road, waterways, airways, we need more and more streamlined system and also a strong coordination between them. GST is providing that kind of eco system for all the means of logistic to come on one platform and help the businesses to take their final goods to the market and bring the input to the factories. So, I mean each and every sector, they are coordinated. I mean take the example of e waybill. If the e-waybill is generated, it is very easy to identify where the goods are going, who are carrying, what tax has been paid on that, so, all these things are also helping the logistic sector in a bigger way. Of course, there is one big challenge is there and that is the cost of the fuel. And since the petrol and diesel, I mean GST has not been able to be imposed on petrol, diesel, natural gas i.e., crude oil, and aviation turbine fuel, so that is affecting in a very smaller way but overall I mean if you take the 70%, 80% thing, because of the better coordination and because of the better eco system, the logistic cost we are able to bring it down, that is going to help the industry as well as the manufacturers. News Correspondent: While we talk about sectoral development and benefits for the common man, we have to speak about the most interesting topic at present, when we speak about GST that is rate rationalisation, so, could you tell us the essentiality's of this rate rationalisation? Economist: A group of ministers is considering various options for rate rationalisation and at this moment Bihar deputy chief minister Samrat Choudhary is a convenor of seven members committee, now why we need rate rationalisation? At this moment, we have four special rate and four general rates. That is, 5 12, 18, 28. Now the big question is do we really need four rates? I mean 5, 12, 18 and 28. There is a lot of discussion that can we merge 5 and 12 and bring it down to 8% and can we merge 12 an d18 and think of a say 15% rate. If we go for a lesser number of rates, it is certainly going to help the business as well as the consumer. Now this is not a very simple call. This is not something very economic call, it’s a more of a political call. So, we hope, and we understand that in next 2 to 3 years, since we are seeing some kind of stabilisation in GST collection, the GST revenue is stabilising, so, more decision will be taken and within next two to three years we will see the number of rates coming down to say two or three. News Correspondent: When we speak about any policy decision always needs to keep the period intact, that means the evolution the much it evolves. So, what do you think that the GST has to undertake so that it can stick with a period, what are the concerns that yet to be addressed or to be addressed. Economist: I think at this moment the most important agenda or most important thing which we have to keep in mind is the GST rate rationalisation. And of course, we are seeing lot of fraudulent activities are taking place in the GST. We are expecting that after this GST council recommendation of biometric based Aadhaar identification of fresh assesses or the fresh applicant who are in the high-risk profile we will be able to call the fraudulent activities in the GST. At the same time, you also have to how this compliance in terms of filling the forms whether we are talking about GSTR 3B, or GSTR1, or GSTR 1A or any other form or even the annual form, how to make it more and more simple, so that businesses should come forward in a bigger number. News Correspondent: Mr. Sinha, Thank you very much. (2/2)