The Centre is clearly stepping up its bid to address concerns about the fledgling goods and services tax regime. In what is being seen as official recognition that drastic action is called for, Revenue Secretary Hasmukh Adhia conceded in an interview over the weekend that it is possible that differential treatment to some similar items may not necessarily be fair. The rates will be revised, he indicated, wherever small and medium businesses and the common man face ‘a big burden’. While GST has brought 27 lakh new registered entities into formal tax coverage in its first three months, just over half of those in the GST net are paying taxes and filing tax returns. September GST collections stood at ₹92,150 crore by Monday — compared to over ₹95,000 crore in July, its first month. Separately, Prime Minister Narendra Modi on Sunday sought to assure traders that anyone joining the GST net will not be harassed by taxmen seeking scrutiny of their past records. These latest statements of intent cap the overtures the Centre has made over the past three weeks to display its commitment to fix the flaws in the new tax regime, starting with the Prime Minister’s October 4 promise to address the woes of small businesses and exporters.
With Mr. Adhia now saying that the GST regime will take a year to stabilise and the government signalling a major revamp in the coming days, we may still be some distance away from seeing the final shape of India’s one-nation, one-tax plan. The commitment to correct course is welcome. But the real question is the timing and sequencing of changes. At the last GST Council meeting, rates of over two dozen items were reset, taking such rate changes since July 1 to over 100 — while some procedural and compliance-related norms were eased. But many measures announced on October 6 haven’t been implemented swiftly enough — refunds to exporters, for instance, have been slow due to cumbersome norms for reconciling records. This should be a cue for the government to consider doing away with the stringent requirement for matching invoices in order to allow input tax credits, which is impeding the uptake of the new tax. On November 10, the Council is expected to take up more rate revisions, process simplification and the inclusion of real estate in the GST regime. Excessive tinkering with rates indicates that the initial levies were not thought through. While at one level, high or incongruent rate structures have driven small and medium enterprises to the wall, at another level, entire product categories are under threat of disappearing, such as eco-friendly hybrid cars. Lastly, given the amount of damage control the government has embarked on, in comparison with its spirited defence of the preparedness for a July 1 roll-out, there needs to be some real introspection about why those at the top were led to believe all GST systems were ready to fire.
