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'GST will definitely reduce costs to customers'
October, 24th 2011

Despite a marked slowdown in industrial output, Central Board of Excise and Customs (CBEC) chairman Sumit Dutt Majumder is confident of meeting a revised indirect tax target of Rs 4 lakh crore this year. Speaking with Pradeep Thakur , Majumder discussed reducing costs faced by consumers, increasing the tax net substantially - and the implications of the controversial Goods and Services Tax (GST):

Industrial production is going down, manufacturing especially has slowed - in such an economic environment, how can you meet the indirect tax target?

Till September 2011, there was 20.4% growth in indirect tax collection while the asking rate is 15% to meet revised estimates of Rs 4 lakh crore, 10% more than the budget estimates. We are likely to reach there as generally the growth in collection is always higher in the second half of the fiscal year than the first...the slowdown in manufacturing is certainly a concern and that is also partly reflecting on excise. However, over 36% growth in service tax collection up to September has given us hope to make up for the loss in Excise and Customs. Normally, collection picks up after the festive season and is always more in the second half of the year.

What is the progress on implementing the GST?

A task force in the finance ministry has prepared a draft discussion paper on business processes that includes addressing issues such as registration, payment gateways, return filings and taxation. The finance minister would vet it soon before it's put up for public opinion. The IT infrastructure that will facilitate payment and filing of returns is already in the process of being rolled out through pilot projects in many states. It will be in place before the constitutional amendment is made.

The tax is controversial politically but will GST implementation mean goods become cheaper for average consumers?

It will definitely reduce costs to customers. Average tax paid by a customer today is in the range of 28% to 30% which includes central excise, service tax and sales tax or VAT. This will come down to 16% to 20% if the government adopts internationally prevalent GST rates. As you can see, the cost reduction is more than 10%.

But won't that adversely affect revenues?

In fact, my collection is expected to be more as the tax net with the roll-out of the GST will be much wider than it is at present. A number of services will be brought under the GST net. Currently, only 119 services are taxed, up from three in 1994. There will be a negative list; other than that, everything will be brought under the tax net.

But without waiting for the GST we are widening the service tax net - already, the inclusion of hotel and restaurant services, banking, financial and educational services have been contributing well to the exchequer.

Taxes aside, what challenges are you facing in the administration of customs and excise?

Our biggest worry these days is fake Indian currency notes coming from neighbouring countries. Smuggling of drugs and chemicals are other issues that keep us engaged...we have increased surveillance at all ports and airports. At the same time, we have simplified procedures and reduced transaction costs substantially. We are gradually moving towards a regime where there will be minimal contact of taxpayers with officials. Already exporters are allowed self-assessment for the payment of customs duty. One doesn't have to meet an officer - unless one's case is taken up for scrutiny.Despite a marked slowdown in industrial output, Central Board of Excise and Customs (CBEC) chairman Sumit Dutt Majumder is confident of meeting a revised indirect tax target of Rs 4 lakh crore this year. Speaking with Pradeep Thakur , Majumder discussed reducing costs faced by consumers, increasing the tax net substantially - and the implications of the controversial Goods and Services Tax (GST):

Industrial production is going down, manufacturing especially has slowed - in such an economic environment, how can you meet the indirect tax target?

Till September 2011, there was 20.4% growth in indirect tax collection while the asking rate is 15% to meet revised estimates of Rs 4 lakh crore, 10% more than the budget estimates. We are likely to reach there as generally the growth in collection is always higher in the second half of the fiscal year than the first...the slowdown in manufacturing is certainly a concern and that is also partly reflecting on excise. However, over 36% growth in service tax collection up to September has given us hope to make up for the loss in Excise and Customs. Normally, collection picks up after the festive season and is always more in the second half of the year.

What is the progress on implementing the GST?

A task force in the finance ministry has prepared a draft discussion paper on business processes that includes addressing issues such as registration, payment gateways, return filings and taxation. The finance minister would vet it soon before it's put up for public opinion. The IT infrastructure that will facilitate payment and filing of returns is already in the process of being rolled out through pilot projects in many states. It will be in place before the constitutional amendment is made.

The tax is controversial politically but will GST implementation mean goods become cheaper for average consumers?

It will definitely reduce costs to customers. Average tax paid by a customer today is in the range of 28% to 30% which includes central excise, service tax and sales tax or VAT. This will come down to 16% to 20% if the government adopts internationally prevalent GST rates. As you can see, the cost reduction is more than 10%.

But won't that adversely affect revenues?

In fact, my collection is expected to be more as the tax net with the roll-out of the GST will be much wider than it is at present. A number of services will be brought under the GST net. Currently, only 119 services are taxed, up from three in 1994. There will be a negative list; other than that, everything will be brought under the tax net.

But without waiting for the GST we are widening the service tax net - already, the inclusion of hotel and restaurant services, banking, financial and educational services have been contributing well to the exchequer.

Taxes aside, what challenges are you facing in the administration of customs and excise?

Our biggest worry these days is fake Indian currency notes coming from neighbouring countries. Smuggling of drugs and chemicals are other issues that keep us engaged...we have increased surveillance at all ports and airports. At the same time, we have simplified procedures and reduced transaction costs substantially. We are gradually moving towards a regime where there will be minimal contact of taxpayers with officials. Already exporters are allowed self-assessment for the payment of customs duty. One doesn't have to meet an officer - unless one's case is taken up for scrutiny.

 
 
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