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Finance Minister says in order to run the country in a proper manner its tax non- compliant character has to be fixed

T HE landmark Goods and Services Tax ( GST) regime is a way to make India a largely tax compliant society, which will in turn give the government exchequer more money to develop the country, Finance Minister Arun Jaitley said on Friday.

Addressing the India Today Midnight Conclave - Tryst with Tax, the finance minister said, " We are running the country on debt. If every taxpayer in the country were to pay their share of both direct and indirect taxes properly, do you think we would have to do that? If you want to run a country, provide proper housing, electricity, water, roads, healthcare, education and so on, we have to fix India's tax non- compliant character," said the minister, hours before the most important indirect tax reform since Independence kicks in on Friday midnight.

The historic GST subsumes 17 indirect taxes such as numerous central and state levies of excise, value added tax, sales tax, octroi and luxury tax on goods and services to levy a uniform tax rate for the entire country. All goods and services have been slotted in four slabs of 5, 12, 18 and 28 per cent.

Jaitley claimed that the ' one- nation one- tax' system is a much more efficient tax system as it gets every GST payer in India to register on the portal developed by the GST Network-- the company monitoring the technology for the whole system.

" When the tax system becomes more efficient, the tax base increases and it becomes possible to make tax rates reasonable. At present, the compliant taxpayer is also paying for the non compliant ones because the government needs money to run the country." The GDP also grows as the size of formal economy grows, he added.

It is mandatory for every business with a turnover of over Rs 20 lakh has to register with the GSTN to conduct business in the country.

So far, 67 lakh out of the total 80 lakh traders who fit the bill have registered on the portal. H HOWEVER, petro goods, alcohol and real estate have left out of the GST's purview for lack of consensus among the states on their inclusion. The reform, which has been 17 years in the making, is coming to fruition with the GST Council hammering out specifics in discussions spanning 17 meetings over the past year.

The GST is also an attempt to make indirect tax more equitable, Jaitley explained. " While the direct tax is progressive as the rich pay more income tax than the poor, the indirect tax is regressive. Everybody pays the same taxes on goods and services, say, for instance on soap." He said that is why it was necessary to label same type of goods under different tax slabs.

" For example, garments can be expensive and cheap. Above Rs 1,000, the GST on garments is different from what you have to pay on those below Rs 1,000.

However, the GST was originally envisaged as a simple system with just one tax each for all goods and all services, which is what it is like in most countries that follow the system. But Jaitley ruled out the model, saying it wouldn't work for India. " In countries with one

countries, they don't have BPL families. Here, still 25% of the population is poor. So it is not fair to compare India with other countries which have rolled out the GST." They are also tax compliant societies, he added.

The four tax brackets are important to keep GST's inflation impact under check by assigning products into the tax slabs closest to the current total tax incidence on them, Jaitley said. Explaining the rationale, Jaitley said, " if an item's total tax incidence is 6 per cent, it cannot possibly be slotted under the 12 per cent category. " That would be highly inflationary. So, we require the 5 per cent slab, which of tax evasion." Under the new system, every month GST payers will have to file three returns on the GSTN -- one that they fill out with all the invoices and two that will be generated by the system every month. Allaying fears about the country not being fully prepared technology- wise, the finance minister said, " Whenever a massive change of this scale takes place, there will be an element of uncertainty and fear of the unknown. That can lead to some disruption. There will be minor problems which can be rectified almost immediately, in most cases." would be for most products used by the masses." Going further, as the tax bases increase, there is a possibility of merging more slabs, he added.

He countered criticism about high compliance burden for businesses saying multiple taxes also have compliance burden. " Now, you pay 17 types of indirect taxes. You pay returns for each of them. If goods move from one state to another, the rates are different and transaction costs are also higher. Instead of this, you have one tax, one return and one interface. In the former system, there were more chances GST payers will have to file three returns on the GSTNevery month

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Publication:Mail Today (New Delhi, India)
Geographic Code:9INDI
Date:Jul 1, 2017
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