DAYS AHEAD of Prime Minister Narendra Modi’s visit to Punjab to address farmers, Chief Minister Amarinder Singh has raised the issue of goods and services tax (GST) in a letter to him. Seeking simplification of GST and also review of GST tax rates, Amarinder has urged Modi to ensure that GST is set right to mitigate, if not fully remove, difficulties being faced by trade, business and industry in the country. Amarinder has urged Modi for quick redressal of some “key irritants” in the GST.
A government statement said the CM pointed out that “GST was a reform in which the country as whole and political parties, irrespective of their affiliations and beliefs, had come together for national good. Despite reservations and individual detriment in certain areas, the states have supported all the initiatives for reform and simplification of our century old archaic tax system.”
Listing key expectations from GST, Amarinder said people were seeking simplification of the tax laws and processes, GDP rise, moderation in prices and boost to the tax revenues. Somehow, the experience of the last one year has been more bitter than sweet. He stressed the need to try and work towards a perfect GST to celebrate this major reform in a true sense.
“Noting that the experience of the last one year showed many drafting and structural deficiencies in GST laws, the Chief Minister said innumerable deviations made from standard provisions elsewhere had introduced tax distortions. Successive reports by the committees constituted by the GST Council had recommended many important changes, he said, adding that as per his understanding, the Law Review Committee, comprising both the Central and State Government officials, had proposed nearly 200 changes. There were significant changes necessitated in key provisions that form the heart and soul of the GST,” the government statement said.
“Multiple tax rates have invited wide criticism even if these have been justified in some circles on grounds of vast income disparity in India,” the Chief Minister was quoted as saying and at that same time recalling that the Prime Minister had himself been quoted that Milk and Mercedes cannot have the same tax rate. Many global experts feel that single rate has far greater advantages and the poor should be compensated through direct benefit transfers so that the rich are not benefited from these concessions, the statement added.
“There was a strong rationale to review all tax rates from the point of view of major simplification which shall also curb evasion and leakages,” said the Chief Minister, adding that the basic principle should be that goods of overlapping nature, close substitutes or goods capable of misclassification should not be subjected to differential rates.
Expressing concern that GST revenues had not shown the kind of buoyancy that was expected, Amarinder said this was worrisome not only on the account of the impact it would have on the precarious financial position of the Governments but also the restraint it would place on the government expenditure and consequentially social justice and development.
The Chief Minister pointed out that the revenue for the month of June, 2018, that is nearly one year after the GST came into force remains nearly the same as in the first month (Rs 95,160 cr vs 93,590 cr). Adjusted for nominal increase in GDP (at current prices) of even 10% the effective revenue was actually much lower over the last year, he noted. The Chief Minster further said that he understood even this revenue was gross without reducing refunds. Net of refunds, the revenues reflect a far more grim picture.