One year of GST: Indirect tax regime is a great success; has led to growth in GDP, says Adi Godrej

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Editor's note: It has been a year since the Narendra Modi government rolled out the Goods and Services Tax (GST), on 1 July, 2017. The introduction of the indirect tax regime marked the end of over a decade of wrangling, when politicians struggled to build consensus across party lines. Firstpost is publishing a series of articles wherein experts will analyse the triumphs and the pitfalls of the roll out of the GST.

The Goods and Services Tax (GST) has been a “great success”, according to Adi Godrej, Chairman, Godrej Group. He figures among the prominent supporters of the ‘One Nation One Tax’ regime.

“GST has contributed to the GDP”, Godrej told Firstpost. India’s gross domestic product (GDP) grew at 7.7 percent in the fourth-quarter of the 2017-18 financial year and that was because of GST, he said, in response to a query on why he termed the indirect tax regime a great success.

The Godrej group has varied business interests, including fast moving consumers goods (FMCG), real estate, and appliances. The introduction of the GST has directly benefitted the conglomerate’s FMCG business.

“The FMCG sector has benefited as rates on consumer products have come down,” said Godrej. Citing the instance of soaps, he said, with the earlier tax regime of Value Added Tax (VAT), octroi and excise being done away with, Godrej soaps cut down tax by nine percent, which led to a reduction in retail prices.

“Consumption has increased further since GST was introduced”, he said, adding that he expected this growth to continue.

Adi Godrej, Chairman, Godrej Group, AReuters

Adi Godrej, Chairman, Godrej Group, Reuters

One of the pain points of GST was the issue with GSTN. Some of those pain points persist. Glitches in the GSTN portal, cumbersome procedures and documentation, as well as the cost of compliance are the major areas of concern that need to be addressed to make GST a success, a recent FICCI survey revealed. But Godrej said that glitches are bound to continue because the GST rollout is an unprecedented exercise.

On being asked if the government could have handled the GST rollout better, he said he thought it did. “I think the government acted quickly when the issue was brought to their notice,” he said, adding that there were meetings held at the ministerial level and concerted efforts were made to solve issues. These showed results, he said. “The [mop-up] in the first month, in July 2017, was still good despite these issues,” said Godrej.

Godrej pointed to the fact that his companies deal with wholesalers, suppliers and retailers, and ‘none’ of them have complained about the new tax reform. “There certainly were some issues when GST was introduced but these were solved soon,” he reiterated.

With GST entering its second year, the Godrej group chief said he is optimistic that it will be more efficient. “I [also] expect growth rates to be good,” he added.

Tax evasion

The GST investigation wing has detected a tax evasion of over Rs 2,000 crore in two months, and data analysed reveals that just one percent of the over 1.11 crore registered businesses pay 80 per cent of their taxes, a senior official said on Wednesday, a PTI report said.

But the GST has proved to be a hurdle for tax evaders. They have found it difficult to escape the tax reform, Godrej stated. He said the tax evaders are the ones complaining.

“Some of the complaints that are voiced against GST are by those who are not used to paying taxes. Under the GST, you cannot evade taxes. The tax evaders are the ones complaining about GST.”

GST collections stood at Rs 92,283 crore in July 2017, collected from 3.9 million tax payers. That was higher than the target of Rs 91,000 crore, the then Finance Minister Arun Jaitley said in August 2017.

“The red line seems to have been crossed. Technically, with 64.42 percent of tax payers’ compliance, we have exceeded [the] target,” Jaitley had said in a conference a month after the NDA government introduced the GST.

Read the other articles from the series here: 

One year of GST: Tax regime is anything but good and simple; govt can simplify it to improve ease of doing business

One year of GST: Integration of unorganised sector is major achievement; govt must ensure transmission of lower taxes to consumers

One year of GST: Government could push a raft of anti-evasion measures if compliance or collections dip

One year of GST: The tax regime is helping reduce shady realty transactions, but property prices aren’t down

One year of GST: The roller-coaster ride is over and businesses are now prepping to switch to cruise control

One year of GST: With compliance at 69%, tax collections have begun to stabilise; time to make process smooth


Updated Date: Jun 29, 2018 17:06 PM

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