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00:00Welcome to the special show. I'm Tamanna and Amdaar. We're talking about the GST Council
00:11Meet. Now, will the 53rd GST Council Meet this Saturday make big changes or maintain
00:17the status quo? All eyes are on this key meet of state finance ministers for a couple of
00:23reasons. One, it is the first meet in over eight months. And secondly, it's the first
00:30meeting after the recently concluded Lok Sabha elections where the ruling BJP now has a TDP
00:38that won the state of Andhra Pradesh as a coalition partner. The BJP has also won in
00:43the Odisha state elections. So does that mean Finance Minister Nirmala Sitharaman, who heads
00:50this Council of State Finance Ministers, will have more support to push through important
00:57changes and decisions in the GST meet? What could some of those decisions be? For one,
01:03the rationalization of rates becomes very important. Secondly, what happens to compensation
01:07says post-2026. But there's a lot more that is in focus as well. What we're going to try
01:13and do today on this show is get a realistic picture, separate fact from fiction, because
01:19you're probably seeing a lot of reports that there could be something done in online gaming,
01:24in fertilizers, in aerated beverage cans. In fact, there's a whole host of stories.
01:29But what is actually likely? That's what we're discussing. So to do this, I'm talking with
01:35Prashant Agarwal, his partner at PWC India. Abhishek E Rastogi joins us, founder of Rastogi
01:41Chambers and L. Badri Narayanan, executive partner at Lakshmi Kumaran and Sridharan.
01:47Welcome to all of you and thank you so much for joining us on NDTV Profit. Badri, I'm
01:52going to start with you. And, you know, just since we're trying to set context over here,
01:57I want to start with what's realistic. You have seen, we have seen fertilizer stocks
02:01go up, gas stocks go up. Some online gaming stocks respond in the markets on the expectations
02:09that these big changes which are pending will all be taken up in the first council meet.
02:14So first question to you, is that even likely or is this going to be more of a meet and
02:18greet, let's get things started kind of a session?
02:21So my own sense is that this is the first GST council meeting after this historic election
02:27where the BJP has come to power for the third time, but of course, with a coalition partner
02:31in TDP and others. So I think the important thing would be to set the stage for the next
02:38three years, five years for reforms. My expectation to start with would be that, you know, before
02:45the elections itself, there were certain agenda items to be taken up. There was a lot of talk
02:48about rationalization of rates, but I still believe that the fitment committee for rate
02:53is yet to provide all the information back to the GST council. And the budget is going
02:58to be coming up next month. I think the focus initially, at least in this GST council meeting,
03:03would be to make certain key amendments that need to be made in the GST act for the purpose
03:09of being able to operationalize certain things. For example, if they want to provide a certain
03:14number of waivers for retrospective issues that are there for the past period, for example,
03:18online gaming, those will require certain powers to be provided to the executive to
03:23issue these waiver notifications. So I think one of the big agenda items that is an expectation
03:29is the GST council to consider and put in place. And this is something which is affecting
03:33not only say the online gaming, but other industries also where there's a difference
03:37of view between how the industry was undertaking certain practices and with respect to how,
03:42for example, the department is looking at the taxation. I think there are some other
03:46more key issues, for example, things like anti-profiting adjudication, where the law
03:50committee has already made certain recommendations. Those are probably going to have an impact,
03:54but my expectation is that probably we should not expect too much from this first GST council
03:59meeting. It's probably going to set the stage for some more reforms to come going forward.
04:04There will be some discussion on rates, maybe some discussions on amendments and some streamlining
04:08of processes for the purpose of taking it forward. So those are my expectations at
04:14this stage.
04:15Yeah, no, absolutely, absolutely. And that was excellent, you know, to set the stage
04:19for what's happening, because the number of expectations have just gone through the roof.
04:24So I'm going to come to some of them specifically. Abhishek Rastogi, do you think it is feasible?
04:29Let me come to the big one, gas. And this is also because the minister, after taking
04:35office, said that we're going to attempt in this term to bring a taxation on gas under
04:43the ambit of the GST. Now, that's seen as low-hanging fruit, as opposed to, say, trying
04:48to bring petrol and diesel under the ambit of GST. Do you think it's feasible? Do you
04:54think if at all there is a conversation, it starts in this meeting?
04:58I think certainly this agenda item is on the cards. And I think this is a good beginning
05:04to start with, because, you know, if you get one of these products under the GST gamut,
05:10it helps the industry, and it also helps in a way to curb inflation in some way or the
05:14other. So I think the moot point today is that, you know, we are looking in the right
05:20direction. And when we are talking about the controversial issues to be addressed, I think
05:26we also know for a fact, with the new government coming into play now, the support is expected
05:35from some allies and partners as well, as far as these issues are concerned. But at
05:41the same time, there could be certain state-specific issues which may will have to be seen that
05:46how the government approaches that, how the GST Council and the finance minister approaches
05:51that, because some of these issues may be very, very positive for key states, but may
05:56not be very relevant for other some states. So I think the pragmatic solution will have
06:02to work here. The more balanced approach will come here. I think this announcement with
06:08respect to gas is a welcome move, because we also feel that, you know, most of these
06:13products must come under the GST regime. How it will happen?
06:17Abhishek, one minute. Abhishek, there is no announcement yet on gas, which is a welcome
06:23move. We are asking whether they'll even talk about it. Do you really think they'll
06:27take it up in this meeting? Because would all states want to give up, want to give up,
06:34you know, their revenues, whichever they're getting from gas right now, and bring it under
06:38the wider GST ambit?
06:40See, what will happen is that these gas and petroleum products, there is a revenue which
06:46goes even to the state. Now, while there may not be a formal announcement, there is always
06:51a discussion which is happening in this regard, because what we understand from the Nord Block
06:56that there are certain papers on how the revenue would flow from this. That working has already
07:00happened. So while there may not be a formal announcement, there are workings with respect
07:05to the number crunching which has happened. When the GST Council meets, I think that number
07:09game will also will have to be discussed in some way, because some states will have some
07:14impact because of this inclusion. So what will happen is that these states which will
07:19have wider implications in terms of the revenue may oppose this move, but then there has to
07:25be some sort of a formula to compensate in some way or the other. So that's what is expected.
07:31So this is for the gas, but you know, there could be discussion with respect to other
07:34issues such as online gaming as well, which would be relevant.
07:38Okay, so online gaming is a hot potato issue. Will they take it up in this meeting or not
07:45will have to be seen as well. Prashant Agarwal, let me come to you on the question of online
07:50gaming as well as fertilizers. Now fertilizers is important and it's a bit tricky over here because
07:57fertilizers one segment like many others which face this inverted duty structure. Simply put
08:03that the input, the GST rate on the inputs that go into making this product are higher than the
08:09GST on the final product. Do you see and what kind of a rationalization do you see, if any?
08:16So I think these are, as you rightly said, sensitive points, especially when it comes to
08:22fertilizers per se and textile has gone through this earlier as well in terms of how the inverted
08:27duty structure can be played out. My sense is there will be discussion on this as far as the
08:32council is concerned. There is always a support to take care of the inverted duty structure in
08:39most of the sectors, but what has happened is wherever there are sensitivities involved,
08:43especially with the end customers being involved, we have seen it has taken more time. So my
08:48personal assessment is discussions on fertilizers won't happen. I'm assuming or I'm sure that the
08:54council will look at the numbers as to how they play out and then perhaps if not in this council
08:59meeting, in the next meeting there could be some decisions around inverted duty structure because
09:04our assessment is there is always a big push to take care of inverted duty structure as part of
09:10the GST regime per se. So that's my sense on fertilizers at this point of time. Okay, what in
09:16your view are going to be the big ticket items on the agenda, Prashant? Yeah, so I think one of the
09:24big things that may happen and it's being discussed a lot is of course on the online gaming which may
09:29come up and you know our sense is that at least for the past period there could be some kind
09:36of a you know assessment being done as to how relief may be provided to the industry because
09:41at one point of time the government is so supportive of building up this whole industry per
09:45se and we have seen in the past that the past minister also had supported to re-look at this.
09:51In fact, even when this decision was made it was clearly stated that it would be reviewed at some
09:56point of time during this financial year. So, one of the assessment is that the online gaming part
10:01of it would be something that they would look at. The other which even Badri covered that there could
10:07be and which industry is also looking at some kind of an amnesty being brought in and for that the
10:13amendment in law would be required. One would eagerly look at how they look at including some
10:19of the products using natural gas. There is also discussion on ATL where the revenue impact is
10:23limited as far as the states are concerned. So, and that would set the podium for others
10:30other products to get included over a period of time. I mean it's not that it would
10:34happen immediately. Our assessment is that perhaps the discussion will surely happen because natural
10:40gas was something that was picked up earlier as well. So, our assessment is natural gas ATL
10:46the discussion would happen one would have to see how and you know which states if at all oppose or
10:51bring up points of discussion. We I don't see that the final decisions on natural gas or ATF
10:58happening immediately but a lot of push may be made to discuss and come to some kind of a
11:04conclusion around it. That's on the broader picture. The other thing I see is that continuous efforts
11:10to see how duty evasions or the GST vision can be taken care of. What more measures may be taken by
11:15the government around that is something that one should expect an announcement around and those
11:20could mean that some of the compliance related changes which may be made making it more you know
11:26robust as a process from a return filing process. Some of the things that the industry had asked
11:31from a compliance ease may also come into picture as we move along. So, those are things broadly
11:37that I see happening. Of course, they will be tinkering on some of the rates and clarification
11:41some of the burning topics which we have seen. It could be corporate guarantee which was one big
11:47issue where the government did come up with some of the amendments but still they were follow-up
11:51discussions which have happened with the industry. There could be areas we hope which may be picked
11:57up around ESOPs and discussed by the council and hopefully clarification being brought in
12:04which could bring in relief to the industry. So, those are things that we believe broadly may become.
12:08We're talking about the GST meet on Saturday. All eyes on what can come out of it. Expectations
12:15perhaps a little over the top that there will be a huge amounts of decisions being taken in a
12:22council which is reconvening after over eight months and after a huge election but nevertheless
12:29there are some important issues to talk about. Just to quickly recap if you've just joined the show
12:34our guests, our experts who've joined us today Prashant Agarwal, Abhishek Rastogi
12:39and L Badri Narayanan do believe that there could be some move on online gaming. That contentious
12:45issue could see some clarifications coming in. No real clarity if they will touch things like
12:50ATF bringing gas under the ambit of GST or even fertilizers and GST on fertilizers but they could
12:57be on point of discussion. One other thing which needs to be on point of discussion and I want to
13:02introduce this element into the conversation by first pulling up what kind of GST collections
13:07we've had. So in the month of May we've had about 1.73 lakh crore rupees in GST collections.
13:15This is an increase of 10 percent year on year. If I account for refunds because remember these
13:21collections some of it will also be refunded you still have about six and a half percent increase
13:28year on year. I'm not talking 23-24 I'm talking about only the month of May but the average
13:33monthly collection has been about 1.68 lakh crore rupees in the last financial year. In fact in
13:38April we hit a record of going above 2 lakh crore rupees in monthly collections. Now why is that
13:45important? The reason also is does this now give an opportunity to start rationalizing rates? Let
13:53me come to Prashant Agarwal on this first. So the idea of GST was that it's a good and simple tax
13:59yet we do have four rates, two special rates for you know silver, jewelry etc precious gems
14:06then you have compensation cess and all of this together creates quite a complex
14:14structure. Do you think now is the time to start talking about rationalization of rates?
14:20So I mean I strongly believe that it's always a time to talk about rate rationalization. We
14:25all know when GST came about there was compromise made to get consensus in place and it's always
14:32good to see lower number of rates or types of rates that we're talking about. So definitely
14:37it's something that is should be on the radar and always being discussed how it can happen.
14:43We hopefully will see some I mean we would want to see some kind of a roadmap because
14:46honestly speaking one GST council as you rightly said there is already too much being talked about
14:52and government has already formed the GOM to talk about the rate rationalization. One will have to
14:56see how the GOM if at all has met and come up with any kind of proposition around rate rationalization
15:03because there is debate around how to make five how to let's say I mean there have been multiple
15:07discussions which we have at least heard in public domain whether 5 and 12 will get merged,
15:12one rate will come about as 8, whether 18 will move down to 15 which was supposed to be
15:18the you know neutral rate revenue rate will rate specifically how would you take care of some of
15:23the exemplary products would that be also brought in. So there are a lot of levers which have to be
15:28moved to make this happen but surely you know one would believe that if you are looking at a task of
15:35ease of doing business making it more simpler as a GST as a law one has to move to this and I guess
15:42there is no debate about it it's about what will fit well and have a consensus in this democratic
15:49GST council is what we'll have to look at so you know these levers how would they play out is what
15:54one has to look at. Abhishek you know your take on rationalization of rates and if such hot potato
16:00issues will also make it to the fore especially right now and the reason why I gave that context
16:05of GST collections is now GST collections are robust enough to start talking about this issue.
16:11I think the formula is simple broaden the tax base and lower the tax rate so I think as far as
16:17the base is concerned GST has been extended to a lot of these goods and services now is the time
16:24actually where lower the tax rate element of it has to come into play and for that to come into
16:30play we must understand that the rate of 18 percent is actually a high rate especially on
16:37these services because you know these are certain elements which are being directly consumed for
16:42instance insurance telecommunication services and things like that so which makes the cost of
16:48procurement of these services very expensive and hence I think the pragmatic approach to start with
16:55would be to rationalize the rate of 12 and 18 percent how and or on what number they would do
17:02that that is still to be seen but that will at the same time reduce a lot of litigation which is
17:08happening between the two rates of 12 and 18 percent now having said that while we've been talking about
17:14rate rationalization the other thing which impacts the consumers or which makes the cost of the
17:21supply expensive is the block credits there are a lot of issues with respect to credits where
17:28vendor is not paying a lot of credits which are being blocked for real estate sector and these
17:33matters are before the court now directly or indirectly these also form part of the cost to
17:40the consumer because the moment there are block credits the cost of procurements increase and
17:46adding the assuming the common margin of profit the cost ultimately to the consumer in terms of
17:52price also increases so I think the twin objective would be not only to rationalize the rate of 18
17:59percent and come to a middle path of 18 and 12 for this these classes of goods and services but at
18:07the same time address a lot of issues because there are hundreds of petitions which are before several
18:13courts with respect to the credits issue either with respect to the block credits vendors not
18:19paying credits denied and things like that so I think the twin approach will have to be addressed
18:24to pragmatically address this issue okay you know how do you see this badri is this something which
18:32is going to be sort of in the deep freeze for a while yeah I'm a pragmatic lawyer so the way I
18:40see it is that you look at these rates and slabs you know from the from the from the lens of of
18:48what has actually been achieved so my own senses you kind of divide these things into tactical and
18:53strategic kind of aspects tactical is what we spoke about in the first half you know rationalizing
18:58particular products inward duty structures block credits and things like that I think those are I
19:03think are very doable and very easy what you're now talking about with respect to rationalization
19:09of slabs would require basically again for the GST council to have a really deep discussion between
19:14the states with respect to whether something is to be increased something is to be reduced
19:18you must understand the states are also equal party and getting everybody to come on the same
19:23page and to come up with this kind of rate structure was very very important what I do
19:27feel over time what will happen is that more and more products will probably start moving into
19:32two of these slabs and I would prefer something like a 12 and 18 percent as opposed to you know
19:37having slabs where there is five percent and 28 percent because if you get it wrong then the the
19:44rate of tax itself is so much higher than probably your profit margin and your revenue margins that
19:48the company itself goes into insolvency in which case a lot of notification will have to be issued
19:53for those of waiving these rates of tax because you know the industry itself will not be able to
19:57survive so I think the more important thing would be to kind of tactically handle some of these
20:02things is what I think the GST council at least the next year or so probably should do make sure
20:07the fitments are correct wherever there are all of these issues that you know both Abhishek and
20:10Prashanth have kind of spoken about block credits invalidity structures all of those to be sorted
20:15out and then probably at some point of time where there is really a reform in mind and we feel that
20:20the slab should be rationalized kind of do it as a two-step process first bring these products as
20:24much as possible closer to each other and then probably attack a three rate or a two rate you
20:30must understand a country like India with so much of complexity to be able to have a two two slab
20:34rate or three slab rate is probably very ambitious but I would of course as a lawyer and as a as
20:39someone who probably wants to increase the ease of doing business in India prefer something like
20:44that no I Badri I get the I get I get the fact that you're pragmatic but then okay let me just
20:49pick up this malabar parotta case it's been going back and forth since the last several years is it
20:57parotta is it bread 5% is it 80% yeah it's it's just it's a great example and and absolutely GST
21:08has increased ease of doing business one nation one tax is a great idea it's it's increased
21:13transparency etc but this just needs to be fixed do you think that this will be a a priority or
21:21how could it be a priority I think I think what I what I call this this case I call it an edge case
21:28an edge case being that in any regime you'll always have some number of products that are
21:32going to have a problem okay and this is a very interesting thing as to what is the nature of
21:37what we generally consume in a in a matter and something which if it was just a single rate or
21:43a two slab rate kind of a system would have been able to address and it would have been no problem
21:46at all I still feel that we should not for example redo our entire GST regime because of
21:52these edge cases and these edge cases I think there should be flexibility in the government
21:57and in the in the board to be able to address it either by way of circulars or by way of notifications
22:04or by way of clarifications so we're able to take care of it but based on this if you want to change
22:08the entire regime which is basically an agreement between the state and the center with respect to
22:12how the rate should be to ensure that we were able to transition from excise and service tax
22:17and sales tax and VAT into this GST regime that's probably a much much bigger question
22:21that's where I come from I'm probably being a lawyer we we kind of come from from that perspective
22:26as to how uh things should be handled of course as lawyers we love to do more and more cases of
22:31malabar paratha but uh but having said that I think yeah each case should never use that for
22:36the purpose of being able to make no no but but I I get that but there might be a lot of
22:41other examples as well I don't know if Abhishek also wants to come into this Prashanth is smiling
22:45as well just quick quick final comments on the complications which still need to be sorted
22:49Abhishek I'll come to you first I think the real problem is that when you are going even to the
22:55advanced ruling authorities they are not passing uh clear orders they are basically all tilted
23:01towards revenue and that's the bigger problem which industry is facing even for certain taxation
23:06issues on these IPR services when there was a dispute between the 12 percent and the 18 percent
23:11and hence the problem which the industry today is facing is that when you talk about advanced ruling
23:18all of these rulings I think and Badri and Prashanth will you know add to it 95 plus matters
23:25are tilted towards revenue so what is the point of going to the advanced ruling authorities
23:29and I'm using that as a conservative number even a higher number could be tilted as you know against
23:35the SSCs and towards the revenue so I think advanced ruling per se we have seen are not
23:41passing uh those orders which you know should have been passed now the only recourse which remains is
23:47to challenge those orders in courts for with respect to the rates and what happens is because
23:53this being an indirect tax in most of the situations you would not be able to recover those
23:59additional taxes and it's a burden on the company so so so compliance litigation also a big deal
24:05last comment from you Prashanth before we wrap and you know I'm completely out of time but
24:09yet there is a case for simplifying this further absolutely I mean I mean no one of none of us
24:16would deny that there is a case for simplifying and you have to start the discussion at some
24:21point of time so I am a firm believer that these things will take time unless we start the
24:26discussion it will only get prolonged as we move along so my sense is rate rationalization discussions
24:32should continue should show seriousness in terms of what is the roadmap that they're looking at it
24:36won't happen in let's say next six months even to my understanding what is also important is
24:41look at litigations uh the roadmap was created for g-stat um I believe there would be some
24:46discussion around pre-deposits that would hopefully ease off uh if there is something
24:50around that so uh that is again an important piece one should look at how fast track we can
24:55do in terms of litigations what could be some of the boundaries created to avoid unnecessary
25:00litigation as well to move forward from a government standpoint so those are additional
25:04aspects that one should look at as we move along in this journey all right so so so a lot of the
25:09laundry list of wishes from the gst council is frankly unending how many of those they actually
25:15address is what we'll wait and see so thank you to all of you for joining us today but before I wrap
25:20up must remind our viewers that we are going to be on top of the entire story the gst council
25:25meet and its implications all of saturday so do stay tuned to ndtv profit
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