GST revenue still too low, scrap anti-profiteering law

By: |
Published: July 2, 2019 1:37:25 AM

As it happens, the BJP won the assembly in 2017—including in Surat where the protests were the most—and the entire country, including Gujarat, in 2019.

GST, GST revenue, two years of GST, anti-profiteering law, Arun JaitleyThe government put off invoice-matching for close to two years, and it is not clear if the latest date—October 1 for larger GST assessees—will be adhered to.

Even critics of the government would agree with former FM Arun Jaitley when he says that, when GST was introduced, many warned that it wasn’t politically safe; the Surat protests and the Gujarat assembly elections were seen as the immediate casualty. As it happens, the BJP won the assembly in 2017—including in Surat where the protests were the most—and the entire country, including Gujarat, in 2019. But, it is also true that, despite the near-doubling of assessees—from 65 lakh to around 120 lakh today—the government didn’t implement the really tough part of GST, that of invoice-matching; so, with GST not doing as much as expected to check rampant tax evasion, the protests were also muted. The government put off invoice-matching for close to two years, and it is not clear if the latest date—October 1 for larger GST assessees—will be adhered to. Not surprising then that GST collections have fallen short of the target by as much as Rs 1.6 lakh crore in FY19, a year in which GST was supposed to have stabilised. Indeed, GST collections could be quite short of the target this year as well, with the first three months yielding an average tax of Rs 104,713 crore as compared to the target of Rs 114,267 crore on the central government’s account.

The government would have done well to push for a single rate of GST since that would have made its administration much simpler—including the filing of returns—but that is water under the bridge now. Critics argue that, since the Centre was guaranteeing the states’ GST revenues, it could have pushed for a single rate, but the fact that Jaitley still raises the issue of how a hawai chappal and a Mercedes can’t possibly pay the same rate shows just how deep-seated the political class’s opposition to a single rate is. In which case, the country’s best bet is that finance minister Nirmala Sitharaman is able to further push Jaitley’s line, of getting the GST Council to reduce the number of items in each of the higher tax brackets.

It is unfortunate that the GST Council extended the tenure of the national anti-profiteering authority (NAA) since it was always unreasonable to expect firms to pass on every GST cut on each of the thousands of items they sell; indeed, till today, NAA has not laid out a framework for how the profiteering is to be calculated. If a GST cut is not passed on in the case of an ice-cream cone, for instance, is McDonald’s to give a detailed breakdown of how much milk and sugar went into this, and how much corporate overhead, along with details of how much those costs had risen? Continuing with NAA makes it clear the government has little faith in the market—with so much competition, firms are constantly cutting prices to gain customers, why wouldn’t they pass on GST cuts?—but the least it can do is to apply anti-profiteering at a company-level instead of at a product-level; unless the idea is to harass companies and using that to score brownie points with consumers.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.