Key note speech delivered by me in the First Annual Conference of the GST Research Foundation

1. GSTSTATUS & WAY FORWARD
R.KANNAN
HINDUJA GROUP
GST RESEARCH FOUNDATION ANNUAL NATIONAL CONFERENCE CONFERENCE
KEY NOTE SPEECH
29TH JUNE 2018

2. GST- TIMELINE

3. WHY GST
• GOODS AND SERVICES TAX BETTER KNOWN AS GST IN INDIA, IS A NEW AND COMPREHENSIVE TAX
TO BE LEVIED ON SALES, MANUFACTURING AND CONSUMPTION OF SERVICES AND GOODS
ACROSS THE NATION. REFERRED TO AS ONE OF THE BIGGEST TAX REFORMS IN THE COUNTRY,
GST IS EXPECTED TO BRING TOGETHER STATE ECONOMIES AND IMPROVE OVERALL ECONOMIC
GROWTH OF THE NATION.
• THE INTRODUCTION OF GOODS AND SERVICES TAX ON 1 ST JULY 2017 WAS A VERY SIGNIFICANT
STEP IN THE FIELD OF INDIRECT TAX REFORMS IN INDIA.
• GST IS A GREAT EXAMPLE OF COOPERATIVE FEDERALISM, WHERE ALL THE STATES DECIDED TO
TAKE A UNANIMOUS DECISION IN THE INTEREST OF THE NATION, AND THEN SUCH A HUGE TAX
REFORM COULD BE IMPLEMENTED IN THE COUNTRY.
• INTRODUCTION OF GST WOULD MAKE INDIAN PRODUCTS COMPETITIVE IN THE DOMESTIC AND
INTERNATIONAL MARKETS.
• IT WILL BOOST EXPORT AND MANUFACTURING ACTIVITY, GENERATE MORE EMPLOYMENT AND
THUS INCREASE GDP WITH GAINFUL EMPLOYMENT LEADING TO SUBSTANTIVE ECONOMIC
GROWTH.
• EASE OF DOING BUSINESS

4. FEATURES AND TRENDS
• DATA ANALYTICS, COMPLIANCE WILL BE THE KEY CORNER STONES
• INTRODUCTION OF THE GST IS EXPECTED TO HAVE SIGNIFICANT MACROECONOMIC
IMPLICATIONS IN TERMS OF GROWTH, INFLATION, EXPORT COMPETITIVENESS AND
THE FISCAL BALANCE IN THE YEARS AHEAD.
• AS GST ENTERS ITS SECOND YEAR, THE GOVERNMENT IS PLANNING TO BRING OUT
SOME MORE CHANGES TO THE EXISTING STRUCTURE OF THIS INDIRECT TAX.
• RATE RATIONALIZATION IS EXPECTED BY VARIOUS INDUSTRY GROUPS

5. BENEFITS
• REDUCE THE COST OF DOING BUSINESS
• INCREASED TAX REVENUES TO THE GOVERNMENT
• IT REPLACING THE INSPECTOR RAJ
• REDUCTION IN MULTIPLICITY OF TAXES, CASCADING AND DOUBLE TAXATION
• CONSUMPTION BASED TAX
• EXPORTS TO BE ZERO RATED:ALL EXPORTS AND SUPPLIES TO SEZS AND SEZ UNITS WOULD BE
ZERO-RATED.
• OVERALL REDUCTION IN PRICES FOR CONSUMERS, UNIFORM RATE OF TAX AND COMMON
NATIONAL MARKET
• NO CHECK POSTS, LOGISTICS BENEFIT: FREE FLOW OF GOODS AND SERVICES
• BROADER TAX BASE AND DECREASE IN “BLACK” TRANSACTIONS
• OPTION OF VOLUNTARY REGISTRATION
• COMPENSATION FOR LOSS OF REVENUE TO STATES FOR FIVE YEARS

6. BENEFITS- CONTINUED…….
• VARIOUS MODES OF PAYMENT OF TAX AVAILABLE TO THE TAXPAYER INCLUDING INTERNET
BANKING, DEBIT/ CREDIT CARD AND NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT) / REAL TIME
GROSS SETTLEMENT (RTGS).
• WILL HELP TO CREATE A UNIFIED COMMON NATIONAL MARKET FOR INDIA, GIVING A BOOST TO
FOREIGN INVESTMENT AND “MAKE IN INDIA” CAMPAIGN.
• UNIFORM SGST AND IGST RATES WILL REDUCE THE INCENTIVE FOR EVASION BY ELIMINATING
RATE ARBITRAGE BETWEEN NEIGHBORING STATES AND THAT BETWEEN INTRA AND INTER-STATE
SALES.
• AVERAGE TAX BURDEN ON COMPANIES IS LIKELY TO COME DOWN.
• EXPECTED TO REDUCE PRICES AND LOWER PRICES MEAN MORE CONSUMPTION.
• GST IS EXPECTED TO BRING BUOYANCY TO THE GOVERNMENT REVENUE BY WIDENING THE TAX
BASE AND IMPROVING TAXPAYER COMPLIANCE..
• INCREASE THE TAX PAYER BASE FOR BOTH DIRECT AND INDIRECT TAXES
• INCREASED FORMALISATION OF THE ECONOMY. INCREASED GDP.

7. ISSUES & CHALLENGES
• RADICAL REFORM
• STILL MANY RATES IN THE SYSTEM. WILL TAKE TIME TO STABILISE – 3 TO 4 YEARS
• TEETHING PROBLEMS
• GLITCHES IN IT SYSTEM
• TEMPORARY MEDIUM TERM SLOW DOWN IN BUSINESS / TAX COLLECTIONS
• DIFFERENT ADMINISTRATIVE POLICIES AND SYSTEMS IN DIFFERENT STATES
• BUSINESS MODEL CHANGE. COMPANIES WITHDRAWING GST REGISTRATION.
• ALCOHOL FOR HUMAN CONSUMPTION, REAL ESTATE AND FIVE PETROLEUM PRODUCTS —
CRUDE OIL, DIESEL, PETROL, NATURAL GAS, AVIATION TURBINE FUEL — ARE STILL OUT OF
THE GST AMBIT.

8. ISSUES & CHALLENGES
• INCREASED COMPLIANCE COSTS
• REVENUE NEUTRAL RATE (RNR). EVEN AFTER MANY REPORTS IT IS DIFFICULT TO
ARRIVE AT THE RATE
• DESIGNING AND TESTING OF THE NEW RETURN FILING SYSTEM, STABILIZING THE
E-WAY BILL SYSTEM AND MINOR CORRECTIONS .
• EVOLVING GST-RELATED LAWS.
• A NUMBER OF IMPLEMENTATION ISSUES RELATED TO IT SYSTEMS, LEGAL
CHALLENGES, EXPORTS, RETURN FILING AND RECONCILIATIONS, PASSING ON
TRANSITION CREDIT, ANT PROFITEERING IN GST ETC. ARE BEING FACED BY FIELD
FORMATIONS OF STATES.
• SEVERAL TRANSACTIONS TAKE THE CHARACTER OF SALES AS WELL AS SERVICES,
THUS THERE IS COMPLEXITY IN DETERMINING THE NATURE OF TRANSACTION.
• THERE ARE VARIOUS DEFINITIONAL ISSUES RELATED TO MANUFACTURING, SALE,
SERVICE, VALUATION ETC. ARISES. THESE NEEDS TO BE RATIONALIZED.

9. TAX COLLECTION GROWTH TREND
% YoY 2014-15 2015-16 2016-17 2017-18(RE) 2018-19 (BE)
Total Receipts 18.6 7.6 12.7 12.28 10.12
Gross Tax Revenue 2.5 8.5 15.5 9.55 14.63
Net tax to centre -69.4 4.5 20.3 15.26 16.64

10. GOVERNMENT FINANCES

11. MONEY COLLECTION & SHORTFALL
State/UT (Jul.17-Mar.18) Protected Revenue per month in Cr Average Shortfall per month % Shortfall
Daman & Diu 70 52 74%
Dadra & Nagar Haveli 83 49 59%
Puducherry 119 54 45%
Himachal Pradesh 394 164 42%
Uttarakhand 537 211 39%
Bihar 1367 524 38%
Punjab 1567 580 37%
J&K 516 190 37%
Chhattisgarh 797 248 31%
Odisha 1194 365 31%
Madhya Pradesh 1660 433 26%
Jharkhand 694 179 26%
Karnataka 3914 876 22%
Rajasthan 1858 335 18%
Haryana 1649 294 18%
Kerala 1822 285 16%
Gujarat 3125 428 14%
West Bengal 2176 279 13%
Uttar Pradesh 3613 431 12%
Andhra Pradesh 1457 103 7%
Telangana 1745 110 6%
Delhi 1818 115 6%
Tamil Nadu 3226 112 3%
Maharashtra 6553 193 3%

12. EXPECTED ACTIONS
• GOVERNMENT IS CONTINUOUSLY TAKING THE FEED BACK OF TAX PAYERS AND
INCORPORATING THE REQUIRED CHANGES IN THE SYSTEM.
• FURTHER SIMPLIFICATION OF FILING.
• IMPROVED IT SYSTEM
• PENALTIES FOR EVASION.
• A NEW AND SIMPLIFIED RETURNS FILING SYSTEM HAS ALREADY BEEN APPROVED
THOUGH IT IS EXPECTED TO KICK IN ONLY AFTER 2019 POLLS.
• TWEAKING RULES FOR PROVIDING INCENTIVES FOR SMALL FIRMS AND DEFERMENT OF
REVERSE CHARGE MECHANISM.
• THE PHASED ROLL-OUT OF SINGLE MONTHLY RETURNS IN NEXT ONE YEAR ARE
EXPECTED TO HELP IN INCREASE IN COMPLIANCE AND REDUCTION IN TAX EVASION.

13. WAY FORWARD
• IMMEDIATE NEED IS TO MAKE THE ENTIRE IT SYSTEM STABLE WITHIN NEXT THREE MONTHS.
• CONSIDERING THE IT CAPABILITY OF INDIA IT SHOULD BE EASIER.
• FAST PAYMENT OF REFUNDS.
• FORM SPECIAL TASK FORCE TO MAKE THE IT SYSTEM ROBUST. THE MEMBERS COULD BE
FROM THE LEADING IT FIRMS OF INDIA.
• NEED TO REDUCE THE RATES TO ONLY TWO ( TIME FRAME OF 4 YEARS).
• COLLAPSE ALL THE OTHER TAXES WHICH ARE STILL OUTSIDE GST SYSTEM INTO GST.
• HARMONISATION OF RATES ACROSS THE NATION. ( STILL STATES HAVE AUTONOMY IN
DECIDING RATES FOR FEW AREAS AND THERE IS STILL DIFFERENCE IN RATES ACROSS
STATES).
• ACHIEVEMENT OF STRAIGHT THROUGH PROCESSING - NO MANUAL INTERVENTION IN THE
SYSTEM FOR FILING AND REFUND ( TIME FRAME OF THREE YEARS).
• PROTECTION OF BUSINESS COMPETITIVENESS OF SMALL AND MEDIUM FIRMS.
• USE OF BIG DATA TO INCREASE THE REVENUES.

14. Thank you