Former CEA Arvind Subramanian. File
| Photo Credit: The Hindu

Revenues from the seven-year old Goods and Services Tax (GST) had not lived up to expectations, having attained pre-GST levels only now, and the objective of a ‘Good and Simple Tax’ remains elusive, former Chief Economic Advisor Arvind Subramanian averred on Thursday, terming the lack of critical data such as refunds a challenge.

Blaming the poor revenue performance to a “rate-cutting spree” by the GST Council between late 2017 and 2019, the economist said both the Centre and the States were complicit in this. “The focus was on collections, because refunds were not published and we were looking at the wrong number.. had the refunds data been published, we would have been much more careful about rate cuts,” he reckoned.

“In February, the government started releasing net GST collection numbers and has now stopped publishing it again. Because we are not getting refunds data, we are under the impression that revenues are doing very well,” Mr. Subramanian said at a seminar on seven years of GST hosted by the Centre for Social and Economic Progress.

Terming the multiple cess rates and the GST rate structure ‘monstrous’, Mr. Subramanian mooted the need to try and simplify the GST rates as much as possible. “You should just have one cess rate, one standard rate and one low rate,” he stressed.

Pointing to tweaks and changes effected in the GST regime every time the GST Council meets, the former CEA said this practice was taking the system in a backward direction in terms of simplicity and rationalisation. In 2015, he had recommended a GST regime with three rates — one rate for essential goods, a standard 18% rate, and a 40% levy for demerit goods.

Mr. Subramanian also said he no longer believed it was a good idea to include items like electricity, petroleum and alcohol in the GST net, something that industry and economists like him had been advocating for years.

“I now believe that would be a bad idea… especially in the current context of the acrimonious relations between the Centre and the States, I don’t think it’s politically advisable to expect or ask the States to give up more sovereignty. They have compromised [for GST’s launch before 2017] but other conditions have changed too much for the compromise to be relevant again,” he said.

Thirteenth Finance Commission chairman Vijay Kelkar present virtually at the TIOL Fiscal Award event.
| Photo Credit: Special Arrangement

A key architect of India’s tax reforms and the chairman of the Thirteenth Finance Commission Vijay Kelkar has called upon the country’s next government to undertake urgent reforms in the “unnecessarily complex” Goods and Services Tax (GST) regime, such as switching to a single tax rate of 12% and sharing revenues with local governments and municipal corporations.

Mr. Kelkar has also mooted the creation of an independent secretariat for the GST Council, the apex-decision making body for the indirect tax rolled out in July 2017, as the current arrangement of the Union Government driving the secretariat may be considered problematic by States.

He termed the simplification of the GST structure, which has a “plethora of rates” and a compensation cess on some goods, as a “critically important fiscal reform” to take the GST regime to its most natural destination. Setting the tax rates “largely with the objective to maintain revenue neutrality”, as done by India, is “counter-productive”, Mr. Kelkar argued.

Single GST rate needed

“The genesis of the current GST frauds lies in the very structure of the GST rates, as high rates of GST make it lucrative for the fraudsters to evade taxes,” he stressed after receiving the TIOL Fiscal Award late Saturday. Instead, he suggested that a single GST rate of 12%, with revenues shared equally with all the tiers of the government and Union Territories, be introduced at the earliest.

“In most of the developed and emerging market economies as well, there is a policy of single GST or VAT [Value Added Tax] rate on goods and services. The countries having a single rate and simple GST or VAT laws have been successful in optimising tax revenue and minimising tax disputes,” the former Finance Secretary noted. Of countries with GST or VAT systems, 80% have opted for a single tax rate, including Singapore, New Zealand, the United Arab Emirates, and Japan.

Stating that a single GST rate is “an unmet goal” in India, he recalled that a single rate of 12% had been recommended by the 13th Finance Commission “very early on in the GST debate”. It would simplify the structure, quell almost all classification issues, and help promote manufacturing and exports, he said.

“The age-old tax policy of having a differential tax rate for ‘must have’ and ‘nice to have’ goods and services should be done away with. The revolutionary reform of introduction of a single GST rate, with additional non-VAT-able taxes such as carbon taxes on a few demerit goods like hydrocarbons, is now essential,” Mr. Kelkar asserted.

‘Share GST with local bodies’

While the Union Finance Ministry providing support to the GST Council during its formative decade is “understandable”, Mr. Kelkar cautioned that it is possible that State Governments, who are also members of the GST Council with equal rights, may not always feel that the present administrative arrangement is neutral and unbiased in terms of its support or the advice it offers to the GST Council.

The veteran economist also pleaded for GST revenues to be shared with the third tier of the government created by the 73rd and 74th Amendments to the Constitution.

“Unfortunately, our urban local bodies are woefully short of the needed fiscal base to undertake investments for vital infrastructure and for the supplies of needed high quality public goods. Equitable sharing of the GST with the third tier will go a long way in strengthening the fiscal base of our urban governments and also to deepen democracy and governance at the grass root level,” Mr. Kelkar said, noting that this is prevalent in vibrant democracies across the world.

“To enable this, we will require a Constitutional amendment, firstly to create the consolidated fund for the third tier of government; and secondly, GST reforms, where GST will be shared equitably by the Centre, State, and the local governments such as municipal corporations. This is only fair and appropriate, as GST is a consumption tax and taxpayers should see direct benefits accruing from their payment of the taxes,” he underlined. Such an arrangement, he noted, would also bolster the quality of governance provided by local governments as citizens’ demand for quality public goods will grow louder.

An Indian consumer goods trader shows letters GST representing “Goods and Services Tax” (GST)at his shop in Hyderabad on August 3, 2016. Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising 13.4% to the second-highest monthly tally of ₹1.72 lakh crore.
| Photo Credit: AFP

Growth in India’s gross Goods and Services Tax (GST) revenues bounced back in October with tax collections rising 13.4% to the second-highest monthly tally of ₹1.72 lakh crore.

October’s revenue growth marks the sharpest year-on-year uptick since December 2022. In September, the growth in the indirect tax collections had slowed to a 27-month low of 10.2%. Domestic transactions and services imports yielded a 13% uptick in October’s kitty. The Finance Ministry did not disclose the revenue growth from goods imports.

GST Compensation Cess collections hit a record high of ₹12,456 crore in October, surging past the previous high of ₹12,025 crore collected in April this year from the levy that will persist till at least March 2026.

Back-of-the-envelope calculations by The Hindu indicate that GST levies on imports of goods rose 13.9% in October, which is faster than the growth from domestic transactions.

The highest-ever revenue from GST was recorded in April 2023 at ₹1.87 lakh crore.

The average gross monthly GST collection in the FY 2023-24 now stands at ₹1.66 lakh crore, 11% higher than the year-ago period.

With inputs from PTI.

New Delhi:

The Congress on Thursday accused the Narendra Modi government of imposing an 18 per cent GST on the water of the holy Ganga river and termed it the height of “loot and hypocrisy”. The Central Board of Indirect Taxes and Customs, however, dismissed the Congress claim and said no such tax has been imposed on Gangajal, used in puja and other ceremonies.

With Prime Minister Narendra Modi undertaking a day-long visit to Uttarakhand on Thursday, the Congress also asked when will he visit the violence-hit Manipur.

“Modi ji, the importance of Mother Ganga, the provider of salvation, is very high for a common Indian from birth till the end of their life. It is good that you are in Uttarakhand today, but your government has imposed 18 per cent GST on the holy Ganga water itself,” Congress president Mallikarjun Kharge said in a post in Hindi on X.

“Not even once did you think what would be the burden on those who order Ganga water to be kept in their homes. This is the height of loot and hypocrisy of your government,” he also said.

The Congress also put out an animated video on the situation in the ethnic violence-hit Manipur on its social media handle and said, “The country is asking – when will PM Modi go to Manipur.”

In a clarification, the CBIC said there was no GST (Goods and Services Tax) on Gangajal.

“Gangajal is used in pooja by households across the country and puja samagri is exempt under GST… All these items have been exempt since the introduction of GST,” the CBIC said in a post on X.

The CBIC said that GST on ‘puja samagri’ was discussed in detail in the 14th and 15th meetings of the GST Council held on May 18-19, 2017 and June 3, 2017, respectively and it was decided to keep them in the exempt list. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Gurugram:

The GST lucky draw ‘Mera Bill Mera Adhikar’ scheme was launched in six states and Union Territories on Friday and the Centre and states have set aside a Rs 30-crore corpus for this fiscal for the reward scheme.

Haryana Deputy Chief Minister Dushyant Chautala said the mobile app for the scheme has been downloaded by over 50,000 people so far.

Revenue Secretary Sanjay Malhotra said the ‘Mera Bill Mera Adhikar’ GST lucky draw is being launched on a pilot basis in six states and the prize money will be contributed equally by the Centre as well as states.

“GST has benefitted citizens, customers and governments. Revenues are increasing every month and Centre and states have come together to ensure that tax rates comes down under GST,” Malhotra said.

As against 15 per cent revenue neutral rate as envisioned before GST launch, the average GST rate today is 12 per cent, he said.

The average GST collection every month this fiscal has been Rs 1.60 lakh crore.

The government on Friday launched the Mera Bill Mera Adhikar scheme on a pilot basis on September 1 in Assam, Gujarat & Haryana and UTs of Puducherry, Dadra Nagar Haveli and Daman & Diu.

Every Month there will be 810 lucky draws. Every quarter there will be 2 bumper lucky draws.

The monthly draws include 800 lucky draws of GST invoices of prize value of Rs 10,000 each and 10 draws with prize of Rs 10 lakh each.

Every quarter the bumper draw would be Rs 1 crore each.

“People should know that GST invoice is their right, it is required for after sales service, and to make people aware we have launched this scheme,” Malhotra said.

Image used for representational purposes only.
| Photo Credit: Special Arrangement

India’s gross revenues from the Goods and Services Tax (GST) hit a three-month high to cross ₹1.65 lakh crore in July. However, at 10.8%, it was the slowest uptick in collections since July 2021 compared to revenues from the same month last year.

Revenues from domestic transactions and services imports grew 15% in July, which marked the fifth occasion that GST revenues have crossed the ₹1.6-lakh-crore mark during a month. Sequentially, July’s collections, for transactions undertaken in June, were 2.2% higher than the previous month’s GST kitty.

The Finance Ministry did not disclose the trend for GST collections on import of goods, but back-of-the-envelope calculations indicate that there was a 0.8% decline in July from a year ago. Integrated GST collections on goods imports dropped by 0.43% to ₹41,239 crore, while GST Compensation Cess levies on goods imports dropped 15.6% to ₹840 crore.

Overall GST Compensation Cess levies, which will continue till at least March 2026 to repay market borrowings made amid the pandemic to compensate States, grew 7.9% in July to touch nearly ₹11,780 crore.

Central GST or CGST collections in July stood at ₹29,773 crore, while State GST (SGST) yielded ₹37,623 crore. The total IGST collection came to ₹85,930 crore, with around 52% of that revenue coming from domestic transactions.

The Hindu Editorial | Reset time: On GST revenue growth

“The government has settled ₹39,785 crore to CGST and ₹33,188 crore to SGST from IGST. The total revenue of the Centre and the States in the month of July 2023 after regular settlement is ₹69,558 crore for CGST and ₹70,811 crore for the SGST,” the Finance Ministry said.

While overall domestic revenues grew 15%, as many as 18 States recorded 15% or higher growth, while 11 States grew at a slower pace. 

Strife-torn Manipur was the only State to record a contraction, with a 7% drop in revenues. However, the north-eastern States of Mizoram (47%), Meghalaya (27%), Sikkim (26%), recorded the highest growth in revenues, followed by Delhi (25%), Uttar Pradesh (24%) and Tripura (23%).

At the other end of the spectrum, Nagaland, with a 3% rise in revenues, Chhattisgarh with 4%, and Andhra Pradesh (5%) saw the weakest growth, followed by Gujarat and Telangana, both of which clocked a 7% growth.

The Hindu Editorial | An incomplete reform: on six years of the Goods and Services Tax  

“The past trend of six key States generating almost 60% of the nationwide GST collections continues in the current month as well,” noted MS Mani, partner at Deloitte India, adding that compliance drives from the Revenue department were yielding results with steady revenue trends.

The ₹1.6-lakh-crore monthly collection mark may be the new norm for GST revenues, said Abhishek Jain, partner and national head for indirect tax at KPMG, who said revenues might rise further with the upcoming festival season and the approaching “normal period of limitation” for 2017-18 assessments.

Mandatory e-invoicing for all firms with a turnover of ₹5 crore, which kicks in this month, is also expected to bolster revenues, though it may pose some transition challenges for smaller businesses.

“Smaller taxpayers may have trouble embracing the new compliance paradigm, but it would ultimately expedite operations, improve transparency, and encourage more transactions with larger businesses, despite the transition’s potential difficulties,” said Saloni Roy, partner at Deloitte India. 

The 15th Finance Commission has recommended that States be given 41% of the divisible tax pool of the Centre. File.
| Photo Credit: Reuters

The Centre has devolved over ₹3.09 lakh crore to States till July of the ₹10.21 lakh crore budgeted to be transferred in the current fiscal, Minister of State for Finance Pankaj Chaudhary said on July 25.

“Out of ₹10.21 lakh crore estimated to be transferred to States for the FY 2023-24, ₹3,09,521.22 crore has been devolved till July 2023, in 4 instalments having double the normal amount in June’23 for FY 2023-24. There is no pendency on part of devolution payable to States…,” Mr. Chaudhary said in the Lok Sabha.

Of the ₹3.09 lakh crore net proceeds of shareable union taxes and duties distributed to the States, Central GST collection devolution stood at ₹94,368 crore till July.

“Part of the CGST collected and credited to the Consolidated Fund of India is devolved to the States as per the accepted recommendations of the Finance Commission. The total amount of such CGST devolution released to states during FY 2022-23 was $2,68,334.19 crore; this was released in 14 instalments,” the minister said.

The 15th Finance Commission has recommended that States be given 41% of the divisible tax pool of the Centre during the period 2021-22 to 2025-26, which is at the same level as was recommended by the 14th Finance Commission.

In reply to a separate question, Chaudhary said Goods and Services Tax (GST) has decreased the number of taxes and overall tax burden while significantly increasing transparency.

“It has resulted in the significant increase in the number of registered taxpayers. Before the GST regime, the number of registered taxpayers was around 54 lakhs, which has now increased to around 1.46 crore after the GST regime,” he said.