‘GST revenues will stabilise in the next 4-5 months’

A lot of negativity surrounding the Goods and Services Tax (GST) have been removed after the Guwahati meeting of the Council that announced reduction in rates of over 178 items and also simpler compliance norms, says Sushil Modi, Deputy Chief Minister of Bihar .

As Finance Minister of the State, Modi is also a member of the GST Council. In an interview to BusinessLine , he said revenue under GST will stabilise over the next four to five months. Excerpts :

States were initially concerned about loss of fiscal autonomy under GST. How has the experience been in the last five months?

There is no issue of fiscal autonomy and the experience is quite good. I was the Finance Minister of Bihar even when value-added tax (VAT) was rolled out. So I have experience of both VAT and GST. Traders initially had problems even under VAT, but that was resolved. It is a similar case with GST. There have been some procedural difficulties for traders and small manufacturers but those are being resolved.

There is talk of rationalisation of more rates under GST...

Over 80 per cent of the issues regarding rates were resolved in the meeting of the GST Council in Guwahati. Only a few issues are remaining. Now, more rationalisation of rates will happen as and when revenues stabilise under GST and buoyancy improves. The focus of the GST Council now is on simplifying compliance and IT processes.

Small traders and manufacturers have high compliance burden under GST….

A lot of issues were resolved in the Guwahati meeting and most of the negativity was removed from GST. People are confident that the other smaller issues will also be sorted.

The main problem is that small dealers and manufacturers from the MSME sector with annual turnover of up to ₹1.5 crore were exempt earlier from central excise. They are now under GST. For them, we have increased the threshold for composition scheme. We will also work on more measures.

You had spoken about an annual shortfall of ₹20,000 crore from the rate cut on 178 items. What has been the impact of GST on revenue collections?

The shortfall in revenue is now coming down. Compared to July, revenue collections have increased in October. I

understand that some States like Delhi have already reached break even point for revenue. In Bihar, we are facing a 54 per cent shortfall but are examining its reasons.

As the system stabilises further and people understand the compliance procedure better, I think that revenue collections by the end of the fiscal will improve substantially.

What was the impact of demonetisation and GST on Bihar, which has a large informal economy?

Demonetisation was a positive move and was also supported by Bihar Chief Minister Nitish Kumar. Bank deposits in the six-month period increased by ₹25,000 crore in the State. How much of it was black money and doubtful transactions is for the Income-Tax Department to ascertain. Contrary to reports that workers lost jobs and returned home, we have not found a single case of that, given that the State has a high migrant labour population. GST also increased the size of the formal economy.

In Bihar, for instance, wholesale pharma traders have reported an increase of 30-40 per cent in sales. It is not because more people are falling sick but because goods are now being sold after payment of tax and with full invoicing. Same is the case with other sectors.

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