The federal government will continue to simplify and rationalise the Goods and Services Tax regime, finance minister Piyush Goyal said in an interview. Describing GST as a “game-changing” reform, he added that an extrapolation of the April tax revenue would suggest that the government could comfortably exceed its tax receipt target for the year.
GST came into effect exactly a year ago, on July 1, 2017, replacing myriad taxes and, more importantly, taking away the power of the states to levy taxes and instead bestowing this power with the GST Council, a body composed of the state finance ministers and the union minister. A year later, it is “a demonstration of India’s federal structure at its best”, Goyal said. “It’s a demonstration that we can make bold and powerful reforms in this country.” The number of assessees is also an indication of the “formalisation” of the economy, he added. The number of indirect tax assesses has increased around 40% to around 11 million.
GST hasn’t exactly been glitch-free. There was outrage in the early days of the tax over the rates on some products. The e-way bill, aimed at making interstate movement of goods hassle-free, created a huge backlog when it was first implemented. And there is still some confusion over the annual returns, the reverse charge mechanism and invoice matching. Goyal said the government’s response has been “nimble-footed” and described GST as an evolving tax regime. The GST Council has reduced the tax on around 400 products, he pointed out, the experience with the e-way bill, after the initial trouble, has been good, and a committee is evaluating the reverse charge and the invoice matching mechanism.
Since the time GST was launched, it has come in for criticism for having five tax slabs. Goyal said it would be unfair to tax a product meant for the rich (“a BMW”, he said) at the same rate at which a product meant for a poor man “in rubber slippers” was charged, but said that if revenue collections improved, and tax receipts stabilised, the council could evaluate lower rates on all products. Former finance minister, and now union minister, Arun Jaitley, who was in charge when GST was implemented, has hinted on at least a couple of occasions that the council could consider reducing the number of slabs.
Goyal also downplayed the impact of rising oil prices as well a weakening rupee and said the Indian macroeconomic situation is good. Given the increase in forex reserves over the past four years, there’s effectively been no depreciation in the rupee, he explained, although he admitted the current volatility is a matter of concern that needs watching.
Still, there can’t be a “knee-jerk reaction” by RBI or the government to this, he added, as the forex market is an organised one and a “organised market needs an organised response.”
The rupee fell to an all-time closing low of 68.79 against the dollar on Thursday.
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