GST, a tale of of reductions and giveaways

In terms of presentation techniques, the interim Budget speech of the Finance Minister ticked all the boxes. He spoke gloriously of the past four-and-a-half years, optimistically of the next 10 years but minimally on the present year.

Not much was expected on the indirect taxes front in the interim Budget 2019 and not much was said also. Since the entire Budget speech had a feel-good pattern, announcements regarding GST had to follow suit. The finance minister devoted four paragraphs in his speech to GST with the headline “GST reform for benefit to consumers and business”.

Repeating the decisions taken at the 31st meeting of the GST Council, Budget 2019 states that GST aims to benefit small traders, manufacturers and service providers through various measures. Exemptions from GST for small businesses has been doubled from Rs 20 lakh to Rs 40 lakh. Further, small businesses having turnover up to Rs 1.5 crore have been given an attractive composition scheme, wherein they pay only 1% flat rate and have to file one annual return only.

Similarly, small service providers with turnover till Rs 50 lakh can now opt for composition scheme and pay GST at 6% instead of 18%. More than 35 lakh small traders, manufacturers and service providers will benefit from these trader-friendly measures. Soon, businesses comprising over 90% of GST payers will be allowed to file quarterly return. A reminder was given that the decision to reduce the rate of GST for home-buyers to a Committee.

Since its introduction, GST has been a tale of rate reductions and giveaways.

Considering this, the revenue numbers presented in the interim Budget are a cause for concern. CGST revenues for 2019-20 have been projected at Rs 6,10,000 crore as against revised estimates for 2018-19 of Rs 503,900 crore — an increase of 21% which appears over-optimistic considering historical trends. The only manner in which this target could be achieved is through aggressive assessments — a fact that the taxpayer would be genuinely worried about.

A large increase in compliance cannot be expected since most GST taxpayers have decided by now whether to get into the GST regime or beat the system. IGST revenues have been retained at Rs 50,000 crore in the Budget estimates of last year, Revised Estimates (RE) for the current year and project estimates for 2019-20 leaves one with the impression that the government is unsure about the manner of accounting for IGST revenues and distributing a portion to the states.

Though no projections were made last year for revenues from the erstwhile service tax, the RE show Rs 9,283 crore having been received — this could well be through the service tax audits that were launched across the country over the last year.

On the customs front, the finance minister mentioned that Indian Customs is introducing full and comprehensive digitalisation of export/import transactions and leveraging RFID technology to improve export logistics.

It may have been over-ambitious to expect major GST reforms in an interim Budget. After a little more than 18 months of GST, it is clear that GST reform cannot happen in Budget speeches or GST Council meetings but in the offices of the Central Board of Indirect Taxes and Customs (CBIC).

(The writer is a Bengaluru-based tax expert)