Geeta Rao Gupta and Ritu Dasji, also governing body members, all the other distinguished ladies and gentlemen who have assembled here today. While, of course, I have come in between parliament, but I am not missing anything in parliament. Because I think one can safely give a time assuming that it will run from 11 to 11.15, then adjourn, maybe assemble once again at 11.30-11.40 only to adjourn again. 12 o’clock, of course, it doesn’t take too long, it takes about 30-60 seconds at 12 o’clock to adjourn.
So, that’s why, while we had first thought of 11 o’clock and I realised 12.30 is a better time because you are safe, you can’t go wrong, parliament would not be functioning at that time. And, that’s a sad commentary on the democratic system, particularly, when the issues are not of that grave a dimension where it would justify or where there was some earth-shattering demand, because of which parliament needed to be adjourned. A few days back they were fighting over the Supreme Court verdict, which said the NOTA option should be there in all elections – None Of The Above. You know, there is that new option that we have in every election, we lost a whole day of parliament, fighting in parliament, because they were so scared that their members will all choose None Of The Above option in the Gujarat Rajya Sabha poll that they spoiled one whole day of parliament on a judgement which the Supreme Court had passed.
We are also not supporting that decision, but it’s a Supreme Court order. If we were not to implement it I can understand parliament getting adjourned on NOTA. But, anyway, it’s a very important day that we are meeting here today, not only because it’s the eve of the Quit India movement, 9th August, also not only because there is an election going on in Gujarat, which is probably holding the whole nation spellbound. First time in my life I am seeing a Rajya Sabha election having this kind of importance.
And I don’t understand why everybody is so worried or concerned about it; we have to win two seats, we are going to win two seats. If somebody else has to worry, then that I can understand, but I don’t know why the whole nation is worried about what will happen over there. It’s nothing earth-shattering. It’s not going to change the destiny of this country or the course of politics. What we are only trying to do is get good governance into India, and what Prime Minister said, the Quit India movement this time around should be taken up as a challenge by all of us to rid this country of corruption, rid this country of poverty, rid this country of social and all kinds of upheavals, all kinds of disharmony in society. And, let’s use this period from the 70th anniversary of the Quit India movement till the 75th anniversary of India’s independence, this 2017 to 2022 period to make this country a better place to live in.
And, towards that end, I think the last 3 years have been a continuous journey to make this country work honestly, to move the economic needles of this country, to make India an honest nation, a nation where business is honest, a nation where politics is honest, a nation where our mindset becomes honest. Ultimately, the problem is not in an Indian’s ability to do good things, each one of us has the ability to move mountains – not literally. Hanuman Jayanti is gone or is a long way off? I don’t know, it’s just gone, sometime back.
But believe me, each one of us, and each one of you distinguished ladies and the few gentlemen who have been forced to come here like Puneet, each one of us can move mountains if we should so desire, if we should make it our mission in life. The sad part has been the enabling environment, the way things happened in this country, the kind of acceptance for mediocrity that we have had over the last so many years, that we are trying to make an effort to change.
Ever since this government came in, literally from the first day, the effort has been to really target and bring down avenues of corruption, bring down the use of illegal transactions, get more and more people to come into the formal economy. And if you look at the history of the 3 years of this government, step after step, be it the SIT against black money, be it the notification of the Benami Properties Act, which was passed 28 years ago, but hasn’t been notified until this year, be it the demonetization that the country actually accepted very-very gracefully despite some of the difficulties that people had to face, be it our effort to give everybody a last chance in amnesty, both for domestic or foreign wealth to come clean and move into the formal economy.
Each one of these has been a series of steps and GST is that final large big-ticket reform that will change the way India does work, that will change the way Indians think about doing business, think about their day-to-day life. In fact, GST would not have been successful, but for the series of other steps, and the series of other steps would have all been in vain if we had not successfully brought in GST. So, they complement each other in very large measure. And I will make a humble effort to try and bring out how they complement each other.
In fact, as the Prime Minister said, it’s a Good and Simple Tax. After all, the fact that nearly 17 different taxes and 23 cesses of all sorts are converging into one will help make the entire administration of the indirect tax collection extremely simple, extremely transparent and will save the country from cascading effect of multiple taxes at different levels, many of which one could never really trace or one could never really understand as to what the incidence of taxes is on the final product that we buy.
I mean, all of you ladies are well known for your shopping. But, I am sure you don’t know that when you buy your next handbag – I am not referring to the make that one of the honourable MPs in Rajya Sabha who has recently resigned, uses, but let’s say even Indian leather bags. Now you wouldn’t know what is the incidence of tax when you are buying that bag in the normal course. You wouldn’t know what is the element of excise duty that has been paid on it or countervailing duty when the goods got imported if they were imported bags. You wouldn’t know what’s the incident of octroi or entry tax, possibly, you may get to see the final VAT paid on it if the seller actually makes a bill in the first place.
Very often, you would just pay for it. He would give you the product and you wouldn’t even bother about asking for a bill. Usually, many of us would not even bother about making sure he has entered the transaction in his register, he’s paid taxes on it. And, therefore, over the period of last 6 or 7 decades, a very large part of the Indian economy has remained in the informal sector. It’s never come into the mainstream, the taxpaying stream of the country. And that has, of course, affected the global perception of India also.
Many people from out of the country and many Indians who had the opportunity to go out to study or work there then find it very difficult when they come back to fit into the Indian way of doing business. And, of late, I am finding the youth of India, particularly, the educated or highly educated youth would get very frustrated and would say, we don’t want to do business the way our parents and our grandparents did, we want to work in an honest clean atmosphere, we want to work with integrity, we want to pay our taxes honestly. And for all such people who are keen to see a robust economy on the back of a formal structure where every part of the Indian economy is captured in the legal framework of taxation, there could be nothing better than the Goods and Services Tax that has been introduced.
In fact, I remember when the excise duty was first imposed on jewellery – since there are mostly ladies here, I thought I will share with you my own experience of those days. The purpose of introducing excise duty on jewellery was to prepare that trade to come into the formal sector, particularly, since we were clear that a year later GST would be coming into the country. And I remember, a lot of jewellers across the country, there may be some of the jewellers in this room also, a lot of ladies doing designing of jewellery in all these days. And they were all very concerned that excise duty there will be a lot of harassment, there will be a lot of problems, record-keeping will become cumbersome. Some jewellers even went on strike during that period.
And I remember I was tasked with trying to discuss and sort out the matter by talking to the people, explaining what we were trying to do. Finally, of course, the entire trade came into the formal sector, they all agreed to pay their excise duty on the products that they make and sell. And I remember, in my various interactions that I used to have and I used to have a lot of interactions like this in those days, the people, the persons in the room who were most enthusiastic about accepting the new way of doing business were the youngsters in the room. So, if I made a comment that we want to put an end to corruption or we want to put an end to black money, I didn’t find many of the older people ever clapping hands as much as the youngsters used to clap in the room. And you could actually perceptibly see that they are happy, that वह बाप-दादा की तरह हमको दो-दो किताब नहीं रखने पड़ेंगे, यह कच्चा, यह पक्का| They want to move out of that old way of doing business.
And I remember when we finally set up that they will all come into the mainstream, I remember giving my own personal mobile number to all the heads of the various jewellers’ trade associations that if you ever get harassed, and you are doing your business legitimately, but somebody is harassing you. Call me up directly, you don’t even have to go to my Secretary or anybody else whatsoever. Call me up directly!
And you will be amazed that in the one and a half year since then or about one year, three months since then, I have not received a single phone call from anywhere in the country. Those associations represented jewellers across the country. If at all somebody has to complain, we have a little bit of a grouse or a complaint for what happened in the jewellery trade between 8th November and a few days thereafter. I hope none of you indulged in buying gold at Rs 58,000 a kilo during that period….kilo nahin, sorry 10 grams. Sorry, I have never done jewellery shopping in my life. Except this Akshay Tritiya, I actually went and got something for Seema by the way. I was in the office and a friend of my mine called me up and said, what are you doing? I said I am just working. He said today is Akshay Tritiya, let’s go and get something for our respective wives. I said if I take something, she will be suspicious, आज क्या हो गया है जो कुछ ले के आया है| But, fortunately, it went off well.
But, anyway, not a single person ever complained to us or to me personally that they have been harassed or… I mean I would have imagined that with fear of excise duty there would have been somebody who must have got harassed, not a single person. I did get one case by the way, yeah, one person, not a jeweller or anybody, a gentleman from Hyderabad came and met me in Mumbai one day on a weekend, soon after demonetization, somewhere in January I am talking about. And in that Hyderabadi lehja, he said that ‘हमारे समाज के लोगों के साथ बहुत अन्याय हो रहा है| मैंने कहा क्या हुआ भाई, हमारे समाज को क्या हो गया? He said, साहब, हैदराबाद में टैक्स डिपार्टमेंट हमारे समाज के साथ अन्याय कर रहा है| मैंने कहा हमारे समाज के साथ क्यों अन्याय कर रहा है, बोला नहीं हमारा एक समाज का आदमी ज्वेलरी ट्रेड में है उसको बहुत harass कर रहे हैं| मैंने कहा यार समाज के हिसाब से तो harass नहीं कर रही होगी, कुछ होगा वजह, क्या है, कुछ मालूम है, जानकारी है?
He gave me a bunch of papers, what was that case? I read that and I actually had to almost throw him out of my house. What somebody had done was that between 8th November and 18th November, he had deposited 94 or 95 crores of cash in demonetized old currency in his bank account, a jeweller. When Bank of Baroda refused to allow him to deposit that money, he went and opened an account in a private bank and he deposited 50 or 45 crores out of that. When, of course, data mining was going on and I think now after 1st July, you all know that a lot of work is going on, checking all the records of those post-demonetization days and deposits. The income tax department asked him that what are these 95 crores that you have deposited in cash? You don’t seem to have any stocks also, it’s a small shop that you run.
He said no, people came to my shop on the evening of 8th November and 5000 people gave me Rs 2-2 lakh, because that’s the limit below which you can get away without giving a Pan card number. ‘5000 people gave me Rs 2-2 lakh and that’s the money I have deposited in the bank.’ Why did they give you Rs 2 lakh each? ‘For future sale of jewellery, they ordered some jewellery with me, worth something less than Rs 2 lakhs each. Wow!
The department asked him that if 5000 people came, there must have been somebody who sat and counted that currency. After all, 8 o’clock the announcement was made, I came to know at 7.15-7.20 when in the cabinet we discussed the matter. 8 o’clock was the announcement, so positively; nobody could have acted any faster than that. And you will all agree, it was a well kept secret.
So, he said, but what can I do, 5000 people came. We said, who counted that money before 12 o’clock midnight? He said I had 8 people who counted that money. This was all written in that income tax notice to him. I read it out in the notice before throwing this guy out of my house. We said, अच्छा उनका नाम-पता ही बता दो? ‘सर अब हमें याद नहीं है उनका नाम और पता, 8 लोगों का|
The tax department said, if 5000 people came, there must have been a big crowd, you must be having a CCTV camera, you are a jeweller shop? He said वह चल नहीं रहा था| ‘अच्छा 5000 लोग आये, 95 crores in your in your shop, you must have had police security or something. ‘No, no I had my private security.’ उन्ही का नाम बता दो? ‘वह भाग गए हैं सब लोग’|
This is how the nation, unfortunately, has somehow over the years tried to beat the system, one after the other, you come out with something good and you will always have 4 or 10 people, not that the entire country is like that. It’s always those few people for whom the nation suffers. I remember in one interaction, soon after GST was announced, one person from the trading community stood up in the room and demanded an answer from me, asking me why should I pay my taxes honestly? What is the incentive for me to pay my taxes honestly?
I had only one answer to give him ladies and gentlemen. When you are cheating on your taxes or you are evading your taxes, just remember, that that money which you would have paid on whatever you purchase, whatever is the tax that you are saving, would have possibly gone to light up the home of some villager, of some home in a remote corner of India where a child has never seen electricity. Possibly, the tax you are paying will save that person in Odisha who was required to carry his pregnant wife for 8 kilometres, or was it his mother probably. For 8 kilometres, because there was no ambulance, there was no health facility nearby. Possibly, it will save a woman from inhaling 400 cigarette smoke because she can’t afford a chulha in her home, a gas cylinder, she’s working on that old wooden coal-based chulha. Maybe the tax we are evading will not help that person who is at the border saving our country from aggression, from very virulent neighbors. He may run out of ammunition, because we didn’t pay our taxes honestly. That’s good enough reason for all of us in this country to start paying our taxes honestly.
And, truly, what we are attempting to do in the Goods and Services Tax is only formalize the entire economy and bring everybody onto one platform where the ability to cheat or the ability to evade taxes will almost become impossible. Of course, we may some ingenious people who may still achieve some innovative methods, but I can assure you that this time around, it’s going to be very difficult to break this system. What used to happen earlier was, because of the multiple taxes all over the place, even if a transaction got caught by any one department, a person could get away by managing that because nobody else would know about that transaction, it could be settled one-on-one.
In the current scheme of things that GST has brought in, it’s not like the old days that the excise department catches you, you sort it out with him, the VAT department will never know, the Octroi department will never know, the Swachha Bharat cess will never be able to understand that an illegal transaction or informal transaction took place. In this Goods and Services Tax framework that has been designed, transactions are captured from end-to-end and records can be matched from the source right from the moment they are produced till there is a consumer sale at the front end. So, the back end and the front end are going to be tallied and matched on a system using the power of technology, so that if anybody tries to evade taxes in the value chain, it will set off a trigger in the system itself, which is without human intervention and will help to trace where the leakage or where the person is evading taxes. That’s the beauty of this system by which we will be able to actually bring the entire economy within the ambit of the formal economy.
There are many times people who make a demand that, you know, keep our sector out of the GST, keep a particular product that women use out of the GST, because it’s related to women, keep a particular product that is used by the poor out of the GST. But the reality is that as we move towards a more and more formal economy, if we start carving out exceptions it’s going to become very difficult to be able to really bring the entire economy on a formal framework and look at the advantages of a formal framework. If everybody were to start paying their taxes honestly, it will actually give you headroom both for better infrastructure spending, targeted spending to support the poor, the women, youth, old persons in the country, the marginalized sections of society who deserve support.
It will also help you to bring down the tax rates, going forward. So, a larger tax base, more people paying their taxes honestly on whatever they are doing, will help to ultimately bring down the tax rates to levels which become much more reasonable. And even now, if you see more than 80% of the items or 82-83% of the items are at tax rates which are below 18%. Of course, some of the items which are at 28 and even more with a compensation cess on it are items which the lot of the women in this room must be purchasing and I think very soon you are going to have a greater cess on the large luxury cars coming in next month. But I think that’s for the good of the country. Think about it.
Ultimately, the nation needs a certain amount of money to run the social welfare programmes, to run the administration of the country, to meet the requirements of the defense forces; all of these are imperatives that the nation has to fulfill. There are some people, particularly, a young leader who sometimes called names, but I have never called him any name, who has been demanding that there should have been only one rate of tax or there should have been only two rates of tax or all taxes should have been less than 18%. You must have heard that story. Some of you may have liked it also, because your Louis Vuitton bags will become cheaper may be.
But imagine, in a nation like India, which has a per capita income of under $1800, which has still 30-35% of the population unable to have two square meals in a day, which has a large middle-class which is always concerned they may run out of their monthly budget faster than the month ends. In a nation like India, is it not imperative that goods which are of public consumption, which are of a common man’s consumption are taxed at lower rates and luxury goods where you can afford to pay a little more should be taxed at higher rates. And, ultimately, what did the government do? On almost all items of common person use, the rates have been attempted to be kept lower than what they were earlier.
So, if earlier there was a rate where excise, entry tax, cess, VAT, all of these put together would come up to, let’s say, 13-14-15%, we have tried to bring them to 12% in the GST. If it would come to 8-9-10%, bring it down to 5%. The effort has been that the common man gets his products at affordable prices. But, certainly, if the SUV or a luxury BMW that one purchased earlier was been taxed X amount, I am sure nobody would be wishing that their tax rate comes down and that burden in order to recover the same amount of revenue gets passed on to items which the poor consume.
And that is the effort that we have tried to do, the reason why there are so many rates is because we have tried to fit every item as close as it may be possible to the rate of tax that it was being charged before the GST came in. And, then going forward, looking at the experience of tax collection, how robust the tax collection becomes, how much each industry increases in terms of the tax collected from that industry, and all of this is easily traceable with the harmonized system of coding, HSN numbers, will give us possibilities going forward to see what can be done to further, in some cases, lower, maybe in a few cases even increase the rate, if there is an unfair advantage. Like cigarettes got an unfair advantage. The government’s… and here the rates are not decided unilaterally by the central government, by Prime Minister Modi or Finance Minister Mr Jaitley. Everything is unanimously approved by the GST Council. So, all these decisions are actually decisions taken by the central government and 29 state governments in 7 Union Territories in tandem, working as one, every decision taken unanimously.
Now imagine, we have had about 19 meetings of the GST Council, 100% decisions in 19 meetings have been taken unanimously. And the representatives there include all political ideologies, you have 2 communist governments, you still have 6 congress governments who are a part of the GST. I think my pun on ‘still’ has been lost on you. You have the Trinamool Congress also represented in that. Then all of them together have come to one framework, then clearly it’s a shared legacy, a shared offering that the entire political establishment in the country cutting across ideological differences or different schools of thought have brought to fore. And in the best interests of the country, in the best interests of women, women entrepreneurs.
In fact, I am sure the women must have been finding it very difficult to do business if somebody seeks a bribe from you, or if somebody tells you don’t make a bill, give me a kaccha bill. I don’t know how many of you know how to keep two sets of account books.
And that is what is being sought to be changed. And the fact that there is an end-to-end capture of every transaction will actually help all of you also look at becoming entrepreneurs, look at running your own businesses, get into the economic framework, economic mainstream and look at the collateral benefits. I think Suresh Prabhuji mentioned it in one of his FLOW interactions that if all the women who work in this country were paid minimum wages that itself would give a boost to the GDP, to the economy in this country by possibly 1 or 2%, just if all the women got paid their minimum wages.
And as the economy moves towards the formal economy, obviously, you will have to also show how many people work for you in your company. Gone are the days you could hide how many people work for you in your company or pay them in cash and get away with it. Because if your sales are going to be recorded, then you will need the expenditure to be recorded also, otherwise, you land up in a mess on your income tax side if your expenses are not reflected. If you reflect your expenses you will have to pay minimum wages to the workmen and working women who work for you.
Imagine, if the entire nation starts paying domestic helps in our homes, domestic support staff that we have in our home, the full honest share of their wages. Could it not impact millions of homes across the country? I don’t know if you are aware, in the last one year alone, Provident Fund, which is a measure of how many people are getting formalized in the economy, has seen an increase of nearly 1.2 crore subscribers just in the last one year. Of course, I don’t know where people are talking about jobless growth and where people are saying that employment has come down, the stark reality is 1.2 crore more people have joined the Provident Fund framework in the last one year alone.
In fact, I would urge all of you ladies to also consider taking the domestic help into the Provident Fund framework and the Employees’ State Insurance Corporation (ESIC) framework. I am sure we have all faced our domestic help getting ill sometime, or somebody in their family getting ill. Ultimately, they are your responsibility only. Who will they turn to? They will come to you for a loan most probably. I would imagine most of you in this room would have given loan to a domestic support staff when somebody fell ill sometime or the other. But suppose you would pay some 4-5% or whatever is the cost, Puneet would know better, I am out of industry now for the last 16-17 years. But 4.75% or something you have to pay to get coverage for the entire family. The person who is working for you – spouse, if he or she is not working anywhere else, minor children, unmarried women and aged parents. The entire family would get 100% health coverage for a small cost of 4.75% of the wages that you pay a person at your home. Maybe that would be what, be Rs 5-600, Rs 700 extra? But the government provides 100% health coverage by covering your domestic help.
But, ultimately, all of that is possible when we all agree and accept that we have to formalize the entire economy. And the GST framework, in fact, will help all of us understand the virtue of moving into the formal economy and I think women of this country – your motto is also ‘power to empower’ or something of that sort? Power to empower? So, you all have the power, as Power Minister, frankly, I don’t have that power. You all have that power to transform India. If each one of the women of this country takes it upon herself that I will make sure that my family takes a formal bill when you purchase anything, my family or the businesses that I am involved in or my family is involved in will pay the taxes honestly and that is taken up as a movement amongst your 4000 odd members that you have? 5000 plus? So, my office research will have to be toned up, pretty poor then.
If each one of you 5000 women become ambassadors of honesty in this country, and I know the FLOW women would be running maybe 30-40% of the economy as it is with the power that each one of you have. When you count all the surnames in the room sitting here, and you will realize that the power that you all have in this economy. The Dainik Jagran can run a movement to encourage more and more people to come into the formal economy.
And, frankly, I personally believe nobody likes to be a part of the dishonest movement. I remember when I used to run industry, I am talking 25 years ago, the worst sight early morning was if you reach your factory and there is a white ambassador standing outside the door. Puneetji, you have faced that I am sure. Many of your husbands will tell you what it feels like if a white ambassadors standing outside your door when you reach your office or your factory in the morning, and worst still if it has that round, you know they love to have that round board at the back of the car – Central Board of Excise and Customs.
अगर वह बोर्ड नहीं होता तो लगता था कि ठीक है कोई होगा मैनेज करके आ जायेंगे, अगर वह बोर्ड होता था तो, better call up your wife, you may not come back home tonight. All of that can change actually. Because in this new Good and Simple system, all that you are required to do is write your sales honestly, nothing else. System has been so designed, this talk of 37 returns and all is hogwash. You must have realized, nowadays, nobody talks of these 37 returns. वह I think हमारे से strategic गलती हो गयी, वह return शब्द ही नहीं बोलना था|
Actually, in GST there are zero returns, not one return is there. All you have to do is file a statement giving your sales honestly, if you write all your sales that you have done and upload it into the GST framework, your job is done. It will take some time to get the system well oiled and set up properly, and you will all appreciate a transformational reform like this will take some time. After all, you know, 1952 we had an Income Tax Act, even in 2017, cases are going on in the court trying to decipher that Act, 60 years later.
So it’s not as if within 30 days everything is going to become smooth and hunky-dory. But in this system, I personally think you will see the fastest acceptability and you see 38 days have gone by now. People, the naysayers used to talk of doomsday and problems and economy will collapse and what not, have you heard of anything of that sort happening? Because, really, it’s so simple. You just write your sales, your purchase register…. And I remember, we used to have a separate sales register for excise, a separate for entry tax which I had in my factory in New Bombay, a separate for VAT, a separate register for various other taxes and cesses, purchase अलग, sales अलग, matching करते रहो, कई बार adjustment करते रहो, क्या taxable है, क्या taxable नहीं है, is this coming at this rate, is this coming at that rate, so many things were there.
In different laws, there were no harmonized rates of taxation. So, if I make water, it could have a different rate in VAT, it could have a different rate in excise, a different rate for entry tax. And if I had plastic coming out of that as a waste, that would have a different rate. So, you were having tonnes and tonnes of laws that you to contend with. Here, once you enter the sales register, your purchase register is auto-populated, it gets generated from the computer automatically from whoever has made that sale to you.
So, if I make water, I am buying this plastic from somebody. I only have to write the sales of my water bottles that I sell, the plastic that I purchase somebody else has sold to me, he will enter sales invoice and in my computer that will show up as my purchase automatically. Similarly, if I buy this cap from somebody else, I don’t have to bother. That supplier will enter his sales invoice, it will show up as a purchase in my books. Now, he suppose he does not enter that sales invoice. Then I will see that, oh my God, my sales are so much but I don’t have any caps showing in my purchase register. I have an opportunity to call him up and say ‘maybe you have forgotten to enter’, ‘maybe you have entered my GST Number wrong’. And he can correct it and then it will show up in my account. Suppose he refuses to correct it, I can then enter it as a purchase invoice in my books. It will pop up as a sale in that fellow’s books.
You know, I told you that you can’t, there is very little room for maneuvering or evading taxes. So, if I have purchased these caps from somebody, he doesn’t enter it, but I enter it as a purchase invoice. It will pop up in his account as a sale. He can’t run away from that sale.
You know in the good old days, on a lighter note, I am not suggesting that any of you or your husbands or your companies have done that, in the good old days what used to happen? Suppose I sell a container load or a truck load of water bottles, so I prepare it in Delhi. I load it on the truck and then I send it, let’s say, to Chandigarh, right? If on the way in a check post, that truck is caught, it will have its invoice and everything, right? At the check post, the truck is caught, then I have two options. Either I settle the matter, in which case the invoice never is recorded in the check post, or if the man is honest fortunately then it gets recorded in the check post – two possibilities. And then it reaches Chandigarh. Now if I have not been caught on any check post on the way, from Chandigarh I will make a phone call and I will say, ‘all clear’. And the invoice will be torn, no excise will be paid on it, no VAT will be paid on it, goods will reach their destination, and there ends the matter. Taxes are evaded.
That’s the kind of things that will change in the current way of doing business, because when I dispatch the goods, I will have to enter an e-way bill in the computer, which I cannot erase after I have entered it and dispatch the goods. There will be no check posts anywhere in the country, seamless movement of goods. Imagine the hours that are lost on check posts, the fuel that is burnt, foreign exchange that is lost because of that burning of fuel and the corruption associated with it.
Now, should this kind of system be allowed to continue that goods leave from one place, if they are caught then the invoice becomes a formal invoice, if they are not caught on the way, you can jolly well cancel that invoice, use that same number for another invoice. That’s how work in many areas used to happen in the country. And I think the people who have designed this entire framework have really put in a lot of effort to understand how various ways of evading taxes were being used.
My compliments to the crafters of this whole GST system. Frankly, I couldn’t have done the job half as good as it has been done, and compliments to the officials who have really burnt the midnight oil and developed this entire framework and the technical people for having given us this very simple system, which will help India become a more honest economy, which will bring more and more people into the formal economic structure. Not that I believe everybody was dishonest, there must have been a small portion which was dishonest. But that small portion was harming the economy in more ways than one. Because in a market, if there are 10 shops selling, let’s say, cloth, garments and one or two of them evade taxes. Their products obviously become cheaper than the others. So the consumer will go wherever it is cheapest. I don’t think we as consumers have ever bothered कि वह without bill बेचता है कि with bill बेचता है|
And if more people flock to these two stores which are evading taxes, obviously, the other 8 will either have to close their business or will have to also start evading taxes to survive in the competition. So, dishonesty is not always because we want to be dishonest, very often it becomes a compulsion in order to survive in a competitive world. So one person or two persons in a marketplace can actually drive others to dishonesty. Ideally, of course, those 8 could have become whistleblowers and complained about these two. But, by the time action would be taken and by the time things will come to light or if at all these people would have not been able to manage, you could have taken action, otherwise, they could have often manage their way through.
Therefore, the whole system in the country was getting very-very disharmonious in terms of honest business. In the current system, after all, if these two people are selling their goods, they will need to have some purchase coming from somewhere, they will need to have a truck which has transported the goods over here. Therefore, they will need an e-way bill. When they sell the goods, there will be a few good Samaritans from amongst you who will ask for a sale invoice. If even a few people ask for a sales invoice, it will become very difficult for this person to keep matching what purchases to enter, what not to enter, and he wouldn’t be sure where somebody from whom he may have got the goods will enter any transaction in the system which can trigger off a red alert that hey this A-Z store has purchased some product, maybe packing paper for all you know. After all, he couldn’t be buying packing paper or carry bags, 1000 carry bags and have only 100 sales.
So, there are so many checks and cross-checks in the entire system that those who want to be dishonest will have to think twice for the fear of being triggered off in the computer system and being caught in the process. So, all those who were earlier forced to be dishonest will now have a level playing field. And, actually, you will see competition in this country on the basis of quality of service or quality of goods, not necessarily our ability to evade taxes.
And that ladies and gentlemen is how we hope to empower honest business in this country, clean up corruption, clean up this problem of black money, have a wider tax base, paying their taxes honestly, expand the formal economy, encourage honest taxpayers, penalize or bring to book those who are still not willing to come on the tax structure.
Of course, a lot of liberty has been given below 20 lakhs. There will be no GST registration for the small traders, small manufacturers, artisans, 20 to 75 lakhs there is a composition scheme by which manufacturers pay only 2%, traders pay only 1% on the value of their sales. Similar concessions have been given on the income tax side, you can have a presumptive rate of profit on your sales up to Rs 2 crore. So, the entire system is geared to protect small businessmen, small retailers, small entrepreneurs, small manufacturers and artisans.
But clearly, the effort is to bring more and more people to come into the national mainstream and within that as you say, the power to empower is with the women. Dr BR Ambedkar had also said that he measures the progress of a community by the degree of progress which women make in that society. And in India, I think the time is right for women to become entrepreneurs, to women to take up cudgels against black money, against dishonesty, the time is ripe that you all become the harbingers of good governance in this country.
And I am very-very confident that if all of you, and the 5000 women here have a lot of power. I am not only talking about the power of your kitty parties. You have a lot of power in terms of your sphere of influence. You have a lot of power on your mobile phones. Each one of you will have not less than 500 numbers. Would I be wrong if I make that guess?
ज्यादा ही होंगे, 500 से कम नंबर आपके किसी के फ़ोन पर नहीं होंगे| थोड़ा बहुत overlap भी निकाल दें अगर, and I take only 400 unique numbers for each of your 5000 numbers, and a quick math will show it’s 2 million people. So, maybe FLOW can take this initiative to spread the word that an honest India is good for the women of India, and when the women of India make progress, when the women of India are happy, when the women of India see a better quality of life, again, there is no power on earth that can save this country from developing.
I invite all of you to be a part of this development. I invite all of you to join us in this journey to make India once again that superpower which it was, once again a nation of honest business, honest trade, an honest economy parallel to the best in the world, a country which attracts talent rather than loses talent, a country where women get respect, save and except some unfortunate incidents that keep happening for which I think we should take the most severest of action.
I remember, I recall Prime Minister Modi on 15th August, 2014, had made a comment which had influenced very deeply. My daughter had come down from London during her break and, by chance, was here on 15th August, and she was sitting on the ground below Red Fort when honorable Prime Minister was speaking and she came back very much influenced by honorable Prime Minister’s comments that each one of us should teach our sons how to behave, I don’t know if any of you recalls that. While we are all the time telling daughters to do this and not to do this, it’s time each one of us started telling our sons what proper behavior is, how to behave. And I remember my daughter getting very much influenced by that.
I hope that message goes to all the men and all the mothers in our country as much as the message of good…. respect for humanity, respect for women, respect for this country and this motherland. I invite all of you to become ambassadors for GST as much as you have been ambassadors for keeping this country as a united, strong, powerful and sensitive country, sensitive to the poor, sensitive to the marginalized sections of society, sensitive to youth, keep that sensitivity in you, work together to make India a great country.
Thank you very much.
Q: Thank you very much for the opportunity to raise a question. My question to the Minister is, did you and your team anticipate beforehand what effect could be and should be of implementation of demonetization and implementation of GST?
Q:Good afternoon sir, my question was on the GST slab on handlooms and how that would further make them less competitive in international markets, even domestically we might see a drop in demand?
Q:Piyush Goyalji, I wanted to ask, what happens to retailer’s stocks who sell pharmaceuticals and FMCG products where GST rates have gone up and they are not getting input credit for the old credit, so they get 40% of the credit if they go online but who will bear the rest of the 60%?
I wanted to ask about the reverse charge mechanism, when you are purchasing from an unregistered dealer….(Inaudible)
I am Annu. I may be wrong here but the other day I went shopping for aluminium windows and lights and it seemed the prices were the same that were before except that instead of 12.5, now they are asking for 28% tax. So, I mean is there something of a check on this kind of a thing and that includes medicines, another thing. It seems there is no change in the price, all those, even cesses have gone?
I am Shilpi Arora, I wanted to know the products which were covered under excise, service tax and VAT, can we get input for such products and what will be the benefit for the consumer? Since all are now GST, so earlier, if I am service tax registered I won’t have taken the input benefit for the excise. So, will be it beneficial to the end consumer or not?
A: Thank you. Frankly, when I first was invited, I was wondering what are ladies going to be interested in this drab subject like GST. Ms Mariyam, first of all, on demonetization, we obviously didn’t know what the impact would be or how we will implement it, none of us knew about it. There had to be a surgical action. It couldn’t have been something where you sit and plan for 6 months and 1 year, as was being sought to be suggested by some of the opposition leaders. If we had planned for 6 months, it would have been out well in advance and then that jeweler would not have been caught collecting 95 crores or trying to launder 95 crores.
So, that had to be a surgical action. Maybe some of you have suffered in that, my apologies to them. But for India, it has at least set the path right that now people are not going to hoard cash and we will be very careful while transacting with cash. We have also brought in a law that you cannot have a transaction above a certain amount in cash that is also being brought in now. So, gradually, if suppose I withdraw 2 crores/5 crores from the bank, it will immediately give a red alert why have I drawn so much money, salaries can all be paid by cheque, all your purchases are paid by cheque or credit card in your cases, so why do people need cash?
There is this big bogey being made out that, oh, without cash one can’t work, one needs to carry large bundles of cash, why? Unless it’s illegitimate cash! If you are paying for the transaction through honest money, you can pay by credit card, debit card, digital means, so many means are there. आप सब अपने अन्दर सोचिये, we are not getting into, I am not blaming anybody or anything. When do you pay by card and when do you pay by cash? Think about it, I don’t want an answer from you.
That has to change in the country, that’s why demonetization was brought in. There was a small or rather even a large inconvenience for some time for some people, I don’t think any of you had that inconvenience. You had your credit cards and debit cards. But that inconvenience, they took it very-very sportingly, because the people of India trust Prime Minister Modi. The people of India trusted that it’s good for India.
You remember that television anchor going and shoving that mike up the mouth of the people standing in the queue for 2-2 hours and trying to make them say something against the Prime Minister, against demonetization, you have all seen that. Even in that line or a person who was not well or lying on the floor said but don’t worry, I support the Prime Minister, he’s doing good for the country. And you saw the results after that, one after the other election, because the common man of India wants an honest India, wants a corruption-free India. They supported it wholeheartedly.
GST, of course, was a well-planned move. Here, all the states were equally involved, all the states’ Finance Ministers have an equal say. So, in the 30-member GST Council, everybody has one vote, one voice, voting percentages based on the centre and state slightly differ, but everybody has one voice, and our effort is that all should be unanimous decisions. And as I said, 19 meetings, 100% unanimity. So, GST was much better planned, anticipated, and therefore, you didn’t find any difficulty, other than the fact that such a transformational move will take some time to understand the nuisances and then there is the transitional period, as many ladies asked about the transitional stocks. That problem will continue to be there for some more time.
Priyanka wanted to know about handlooms. First of all, less competitive internationally? Not possible, in fact, more competitive internationally. Because earlier, there were many indirect taxes that were paid at various stages while making handloom like entry tax or octroi, you would never get a refund of that. Or if there was some excise duty or tax paid at intermediate levels for any of the material you bought, maybe packing material, maybe containers, boxes or whatever. All that was lost in the system, now you can take a credit of each and everything that you buy, the taxes paid on that.
So, internationally, you will obviously become much more competitive, also you would be protected from imports, because the GST rate will be also charged on imports as a countervailing duty, IGST it is called now, earlier it was countervailing duty. So, in fact, you will protect your market from indiscriminate imports also.
And, as regards the local competitiveness. Two good things, one, whatever the rate, it’s same for everybody. It’s not, arre Maharashtra it is different, in Gujarat it is different, in Delhi it is different. So competition will be equal. One can argue rates should be more or less, that’s a different argument, but the competition being equal, you will be, again, successful on your quality of service or quality of goods.
Second, handloom by nature are made by small units. I thought handloom is something where you are encouraging people to hand-loom, right? That’s the word! So, I don’t know which lady or self-help group or whatever is making handloom in such a large measure that they will cross 75 lakhs. So, up to 20 lakhs, it’s tax-free, up to 75 lakhs – 2% for the manufacturer, if they are retailers then only 1%. And above 75 lakhs, then I think it’s lost the character of a small unit, then it should pay the tax and then come in the competition with other in the same category. So, the advantage is fair competition, not an unfair advantage to one or the other except the small people who are genuinely making handlooms at a small scale.
Poonamji, about the pharma and FMCG stocks, wherever you have the invoice of your purchase and if it reflects excise duty or VAT or whatever paid, you will get that fully. Otherwise, I think that 40 has been increased to 60% on transitional stocks.
Well, ultimately in a transitional period, one will have to go by some general formulaes.
Q: So the manufacturer pays for it?
A:Which manufacturer? This is only at the stage of final sale, if it’s the manufacturer, he will calculate his input credit and accordingly price his product. The pricing of product is not a controlled price, the pricing is of the manufacturer himself. But taking your point forward, this transitional period is going to have a little hiccups where some people may gain, some people may lose a little bit. But that there is no other way to make this transition any smoother, you can’t allow everybody to get 100% credit because those records are not available. Many people may have bought in cash without paying the tax altogether.
We are having this problem in certain sectors where people are after a lot of fight and strikes and everything, they have boiled down to this issue that okay, everything else is okay, what do we do with the stocks we bought in cash for which we have no purchase invoice. So, we really had no answer for that, if you bought in cash, how can we find a solution to your having not purchase it through honest means. So, there will be this transitional issue, to safeguard those who have invoice are getting full credit, purchase invoice, tax-paid invoice. Otherwise, they are given some 60% of the VAT that they would otherwise be entitled to and that’s the end of the transitional story, nothing more can be done on that. You want to ask me?
I thought you put on the mike. Say it, no problem.
Q: It’s a little bit of understanding, actually, my husband also wanted to know about this, he’s in the Ayurved industry. So, when we, the retailers get about 12 to 18% profit, now, those people who can print the new MRP are either the importers or manufacturers or the packers. So, now the stockists cannot put the new MRP?
A:I wouldn’t know the technicalities of it, but I think the goods have to go through a new MRP process. Whether retailers are allowed to put it in or it goes back to the factory, I wouldn’t know. I am really not a GST Commissioner or Officer, more on political end I can answer. But the best thing is to just talk to your GST office, your husband must be having a GST office nearby.
Q:They have not been able to solve this.
A:Why don’t you write me a mail, I will be happy to get you an answer on that one, not a problem. If any of you has an issue which you are not able to get an answer, you can write in a mail to me. My email Id is piyushgoyalBJP@gmail.com. That’s my personal email Id, you can write to me. We will make sure that it goes to the GST office to get some response to you. Put in your name, address and all that.
Poonamji asked about the reverse charge method. That’s actually a very beautiful thing which I would like to take a minute to explain to you. A lot of people were wondering, why this complication of reverse charge? Let me explain why this has been brought in. Suppose Puneet Dalmiya claims that his business has a turnover of less than Rs 20 lakhs, just a few 10-12 zeros missing in that, that’s a different thing. But if he says his turnover is less than Rs 20 lakhs, how will we ever know that his turnover is more or less than 20 lakhs.
So, this reverse charge mechanism has been devised that wherever he sells goods, those people would want to take that purchase invoice, because they want to show these purchases. After all, later on, income tax will also get all these details from your, sales कितना हुआ, purchase कितना हुआ, पूरी economy को साफ़ करना हैना, सिर्फ indirect tax नहीं| तो when he sells to 20 people, maybe Rs 2-2 lakh worth of goods, but himself claims that he is below 20 lakhs, those 20 people will have to show that purchase invoice, charge a reverse charge on it, the GST will have to be paid on it. And that will come into the computer that Puneet Dalmiya 2 लाख उधर, 2 लाख उधर, 2 लाख उधर, 2 लाख उधर|
Low and behold, it’s crossed 20 lakhs. So we will be able to catch hold of him, you have not shown your sales correctly, you need to register yourself. That’s why this reverse charge has been brought in, but the moment you pay this money, you take credit simultaneously. So you pay Rs 100 under reverse charge as GST by one entry you pay, by the second entry you take a credit for that and if it remains unused you can also get a refund as per the refund process. So, it’s 100% refundable. When you buy from an unregistered dealer or a composition dealer and you have to pay under reverse charge mechanism, you need not worry. You get a credit right away for whatever you have paid, purpose is only to get a record of all those who claim to be below 20 lakhs and below 75 lakhs also.
One or two small questions. Annu Jindalji was an artist. What you said is really something we are very concerned about. People don’t pass on their input credit and they have kept the base price the same and just changed the tax rate from 12.5 to 28 as you mentioned. That is what anti-profiteering law has been brought in for, so that those who don’t pass on the input credit can be booked under the anti-profiteering law, particularly, when now you are getting credit at every level. So, if you don’t pass that on in your price-product costing. So, in that particular case, you can tell us where that happened, so write me a mail on that. I can have some officers visit and check up what’s happening.
There would be some instances where there may not be an input credit, at least on aluminum windows, 100% that’s not the case. They are getting huge input credit on aluminum, on whatever other accessories they purchase on the glass, so certainly, that person is cheating, he is not passing on the input credit.
Q: Rather than I complain or anybody else complain, can we have a general, just a sporadic checking by officers?
A:You know, why we are trying to avoid that sporadic checking as yet is that we don’t want to get into the harassment mode, we want more and more voluntary compliance. Otherwise, the harassment will start, it will be even worse. I told you about the harassment we used to have in the good old days or the bad old days, whatever. So, we are trying to avoid that, the reason this system has been designed to be totally self-integrated in such a way that all triggers come out of the system.
Are you ladies aware that 99% income tax assessments today are computer driven, are electronic – 99%! So, that much harassment has been brought down even in income tax. It’s only with specific inputs of some transactions which are illegit that income tax actually takes up a survey or a scrutiny.
Q:May I ask about lights, on LED lights the prices have gone down I think because that was the government’s promise?
A: LED lights, I don’t know, has the rate being made 12%, now I think it’s been made 12%. I don’t off the cuff remember, but it’s being made 12%, in which case they should be cheaper. Because they will get an input credit on whatever they are purchasing also. There was this misunderstanding, fortunately nobody asked, fortunately or unfortunately, about sanitary pads. There was a lot of misunderstanding and a campaign was going on.
But the reality is if we made the rate less than 12% it is now, it would have actually made the pad costlier. Because the input credit would have got lost in the system, and imports would have become cheaper. The moment you put 12% on imports also there is a 12% tax, but if you made it cheaper then our input credit… you reduce the rate let’s say to 5%. Then on imports also there would by only 5%, Chinese goods would have come into India, other countries would have started exporting to India. And Indian manufacturers would not have been able to use that input credit on plastic, or whatever cloth, whatever else goes into it, the resin, the chemicals and everything that go into it.
And earlier, the rate was 13.5%, nobody ever raised their voice about it. Because it was hidden in so much percent excise, so much VAT, so much octroi, all that we have done is accumulated all the rates, totaled it and fit it to the nearest GST slab. So, this is a misinformation campaign that the honorable Finance Minister clarified also that was sought to be made. And for small manufacturers, the self-help groups and all, up to 20 lakhs it’s zero, up to 75 lakhs they pay only 2% in any case. So the small self-help groups have been protected.
You know my own wife distributes a lot of sanitary pads to poor girls in village schools, so she buys from the self-help groups and they have no tax issues up to 20 lakhs, and up to 75 lakhs only 2%. So, lot of misinformation campaign, but it’s only 38 days today, give it some time to stabilize.
Q:Even the assessment in GST is going to be….
A:Computer-driven. Unless the triggers come out that Puneet didn’t show his sales properly. The press, please don’t take it personally, there is one name I know here so I am using it again and again.
Products covered under excise duty and VAT, can we take input? Shilpiji asked that, even earlier in service tax you could take excise duty credit, even earlier, only VAT and Octroi and all you could not take credit, that now you will be able to take credit. So, if you are a service provider, your rate has gone up 15 to 18, but you will get credit on the rent you pay, you will get credit on the housekeeping services you hire on the computers you buy, all of that, on any goods, fax machine, Xerox machine or anything else that you buy, you can get credit for all of that in the new scheme of things.
Q: What will happen to the disputes like service tax, excise disputes which have happened, the cases and all which are pending?
A:The old cases we can’t do anything, that’s a legal process. There were many opportunity to settle in the past, but I don’t know if the honorable FM has any plans to come out with a new scheme, I am not aware of that. But, otherwise, those cases will have to be sorted out and closed, the past cases.
Anjanaji, handlooms I already answered earlier also. But other than that once you get into the organized sector then it will have to be at the rate of tax, but let’s see if at all you have made a representation and they reconsider. Thing is reconsideration cannot be done by Mr Modi, Mr Jaitley or central government alone, only the GST Council has the power. So, we have abrogated our power to the GST Council and we have to get all the states on board when we make any change, because half the tax goes to the state, of the half that comes to us also, more than 60% goes back to the states. So, really, out of every Rs 100 GST you pay, more than Rs 80 is going to your state for its welfare activities and other administrative costs. Centre is a very small player in this entire GST framework.
August 1, 2017 Speaking at Indian School of Management & Entrepreneurship, in Mumbai