Friends from industry, from trade-small, big, medium, very good morning to all of you. I am actually very delighted to be in Visakhapatnam for more reasons than one. One, of course, we are today celebrating the International Yoga Day. The third International Yoga Day, which to my mind is a matter of pride for each and every one of us in this room. It was India who has finally arrived on the international stage with the advent of Yoga. The second good reason is that Visakhapatnam has been elected, not selected, elected as the third most clean city in the country. Of course, and while I am at this clean city I must say that my wife who has accompanied me this time was mentioning as we drove in yesterday and today morning when we went for the yoga programme that she suspects this should have been no.1 in the country. And of course, the third important reason why I believe I am delighted to be here is that I am getting to meet all of you to discuss the GST tax regime.
And in all of these three, the common thread is the Prime Minister Shri Narendra Modi. He has brought the International Yoga Day to India. The world unanimously in the United Nation accepted June 21 as International Yoga Day. It was celebrated in 118 countries, demonstrating India’s leadership in the world today. Swachh Bharat is his campaign, which has been carried forward very ably by Hon’ble Chief Minister Chandrababu Naidu Garu in his state. He is the chairman of the sub-committee of the chief ministers. And GST is to my mind, the greatest reform that India has seen in 70 years of independence. It’s a fitting tribute that it will be launched on 30th June at the stroke of midnight from the august precincts of the central hall of parliament, when all of us will be over there, our chief minister Babu Garu will be there.
We will all be celebrating what is going to transform India’s economy, going to transform the way we do business. As Prime Minister said, it’s not GST-Goods and services tax, it’s a great step to transform India, the great step to transform India. It’s like a tricolour which has saffron, which has white, which has green, it unites all of us in one string.
I think you go anywhere in the world when we see the tricolour, we have a respect towards our national flag. We go anywhere in the world when we hear the national anthem, it unites all of us, there is a respect towards it. Similarly, the GST is not just an ordinary tax reform, it is finally making India one nation, one tax in one…..and in that sense, as Hari Babu Garu said, this is not about what the central government desires to do, or what individual desires to do. This will be the success of truly collaborative and cooperative federalism at its finest where every state in the country, every Chief Minister and Finance Minister of each of the states and Union Territories in the country has an equal role along with the central government and with honourable Prime Minister Modi to bring about this reform. And, therefore, this is going to a celebration, not of one individual, not of one party, not of the central government, but it is going to be a celebration of 125 crore Indians where all of us, like beads in a necklace, have contributed to the making of GST. Every Chief Minister, every political party, whether in government in a state or no, a political party may not in government in any of the 28 states. But it may have some members of Parliament in either of two houses, it may some MLAs in the house of any of the states of the Union of India. And everywhere, it has been accepted unanimously. So, to my mind, this is truly history in the making and each one of us in this room are participating in that history so that 50 years, 100 years later, future generations will remember the India of 2017, and each one of you for your role in making GST a grand success.
Of course, when there is such a big transformation, such a big change, obviously, it’s not going to be easy. We have all, after all, I believe most of you here are traders, are businessmen, you all know how difficult it is to run a business. Somebody may be doing a 1 crore business, somebody maybe doing a 20 lakh business, somebody may be doing a 1000 crore business. But the problems are the same in all of our businesses. I understand that because I started my career as a small scale entrepreneur by setting up a small-scale industry in Mumbai in a remote suburb called Dombivli and if I recall correctly, I was only 17 years old at that time, I must have made at least 100 trips to the Maharashtra Industrial Corporation way back in 1979-80 to get a small plot of 2930 meters allotted to start a small scale industry, at least 100 trips.
So whether you run a small business, or you run a large conglomerate, I think we all have challenges. We all see difficulties, but then you will also appreciate when such a massive change is sought to be introduced in the country where several different taxes are all going to be subsumed into one tax, where several different points of problem or points of difficulty or if I may even venture to suggest with due respect to both of you government officials – where several points of harassment are also sought to be subsumed into one. Obviously, the change is not going to be simple.
There were many times this talk that whether we are prepared for GST, whether it should be rolled out on 1st July or 1st August or next year or the year after. In Hindi, there is a saying, Kalkare So Aaj Kar, Aaj Kare so Abb! Even if you roll it our 5 years from today, the difficulties will not be any different. It will be the same. You can test the GST and net worth 50 times but as I have observed in my own 30 odd years in service that technology has the great art of failing at the right time.
Of course, at one point of time, the even power used to go away at the right time. In fact, very often, when I am giving a speech power does go away, I hope it doesn’t go away today. And my wife has a very good argument for this, she says God keeps taking away the power everytime you give a speech to remind you that your job is not complete, you have a lot of work more to do.
But, first of all, I want to share with you ladies and gentlemen that when you transform in such a big way, in your own businesses, in your trade, you think when you are doing some – you start a new line of business. Suppose, you start a new shop or you start producing a new product. Don’t we all face teething troubles, don’t we all have some difficulties initially. But as they say, a problem is only a problem till a solution if found, after that it doesn’t remain a problem. And as we move into this new regime, even if we face some difficulties, there will be no problem which is insurmountable, because we trust each other. The government trusts the people of India, the people of India trust Prime Minister Shri Narendra Modi, trust the various leaders that they have elected in the different states and they trust that this is a step in the right direction. It is a step which is going to change the way businesses are conducted in India. And it is this trust which is going to make GST successful. It is the trust of the people of India. It is the trust of business persons in India that finally we can look at a corruption-free India, finally, we can hope that our taxes go to the right place. We pay the right amount of tax, we are not harassed unnecessarily and we can live a life of pride, as businessmen we will not be looked at with suspicion. We will not be looked at as a source of, well, illegitimacy or illegitimate revenues.
We can all plan that if we do our businesses honestly we will have no harassment in our life. And I will briefly try to explain to you why I believe this will be an end to harassment. I very often heard businessmen say, that no I don’t want to do anything illegal, I don’t want to save taxes. But, what do I do, I have to pay bribes, or I have to pay political parties or I have to pay politicians. That is why I am required to do, what do they say, No. 2 ka dhanda? You have on the official book and one unofficial book. You show some transactions in your book, you don’t show some transactions. And, then there is the other sort of businessman who does not want to pay his taxes honestly and who causes so much distress that like say in a market if you have 10 shops selling cloth. If two people don’t pay their taxes honestly, the other 8 are at a disadvantage. Because his product is cheaper, he doesn’t pay his taxes, he doesn’t report his income. And the other 8 will either get outpriced or they will have to join the bandwagon because if you remain competitive they will have to join the bandwagon.
And, then there is the 3rd category of businessmen who don’t even know what is his tax liability, how he has to pay tax, what needs to be done. So these are the 3 broad categories in which we can categorise all the businessmen – those who are forced to do it, some who do it because they want to evade taxes, some who are ignorant. I will try to explain to you how GST brings them all on one platform and makes doing business simpler, without discrimination helps everybody to compete on fair terms and, ultimately, helps each one of us contribute to wiping the tears of that poor person who does not have electricity in his house, whose children do not get access to good quality education, whose parents cannot afford healthcare, if we have to change the lives of all these people, we will all have to contribute in our own humble way and that contribution will come about through our honest involvement and engagement in the GST.
If you take the first category who believes that he has to do it because he is harassed by any officials or politicians or anybody at all, GST brings good news. Why does it bring good news? Because, in a very simple manner, all that you are required to do is enter the details of whatever sales you are doing and nothing else. Almost everything else is taken care of by the system. The only responsibility on all of us is to enter our sales invoice honestly into the computer programme, for which also I think they are giving the computer software also free. So, to just enter the sales invoice in a computer programme. Maybe at some stage I just thought of it as I am speaking, I will talk to the department when I go back to Delhi. Maybe we can even create a small program on the telephone, on our mobile phone where you can enter your sales invoice on your phone if you don’t even have a computer, even a small hawker in the street in his phone can enter his sales invoice, we have tried to create some software, very easily, you create a mobile app. So, we will do it online, even on a mobile phone it can be done. It’s not a problem.
For the small traders, up to 20 lakhs, there is no need to do even this. They have to maintain no records, pay no taxes at all. And, by the way, when we say no taxes, it means no taxes which earlier would have meant 20 different types of taxes, it could be excise, it could be service tax, it could be VAT, it could be octroi, it could be entry tax, so many different ones has been subsumed into the GST.
For those from 20 lakhs to 75 lakhs, there is also a composition scheme, in the composition scheme, you don’t have to do too many calculations of sales, purchases, this that. All you need to do is total your sales, enter your sales, if your total sales are below 75 lakhs in a year, if you are a trader you pay only 1% composite tax on your turnover. So your turnover is 56 lakh rupees in a year, you pay 56,000 tax and that’s the end of the story. If you are a manufacturer, then you pay 2% as tax and no need for any other record, for small scale manufacturers, up to 75 lakh rupees. Even for those beyond 75 lakhs, there is this concern amongst people that we have to file 3 returns every month, that we have to file some 37 returns every year. This is all nonsense, if I may say so. This is all a certain segment of society which is trying to derail GST because they are worried that GST will bring the entire informal economy and all those in that second category of persons who are deliberately evading taxes will bring all of them into the formal fold. This is some misinformation being spread by certain elements like that.
Whereas the reality is that when you enter the sales invoice in your system, it automatically goes into the account of the purchaser as his purchase invoice, and whatever you are purchasing if you have purchased from anybody when he enters it as a sales invoice, it comes into your purchase register automatically. In fact, in our old days, all the CA students will tell you that you had to enter your own purchase register and you had to enter your own sales register. Now, this may have certain incomes for the first 1-2-3-4-6 months, possibly the matching and this and that. Some people may enter the sales invoice, little mistake in the GST and number of the purchase of the purchaser so it may not go directly into his account. We will get used to this. We will get into the habit of correctly entering the data.
But instead of now entering your purchase data and your sales data, you only have to enter your sales data, nothing else. The moment you enter your sales data, you automatically create the purchase register of all the people who have purchased the goods from you. I think 5th – up to the 10th you have to enter the – you have to enter your sales invoice up to the 10th of the following month. It’s not even compulsory that you have to enter every day, you can enter in one go if you want, you can enter every day if you want, your choice. By 10th of the next month, say July you will enter by 10th August, of course, so that the initial …… troubles are taken care of, we have given time up to September for invoices to be entered of July and August, two months.
Up to the 10th of next month, when you enter all your sales invoices, the automatic purchase register is created by the other person who has purchased, and your purchase register is created from the sales invoice entered by whoever you brought the goods from, then from 11th to 15th, you can match the purchase and the sales invoice. You can make sure that all our purchases are entered or no. Those whom you have sold to, they can check that they have got their purchase invoice in their register, if it is missing, you can contact the fellow whom you have purchased from and tell him that look you have not entered your sale and my purchase, please enter it. If that fellow is trying to evade taxes and he doesn’t enter it, you also have the ability to enter your purchase invoice, because the moment you enter the purchase invoice, it will show up as the sale invoice of the person you purchased from.
You remember, I told you that there is this set of people who deliberately evade taxes, in this, it is going to become more and more difficult to evade taxes. Because, if the seller doesn’t enter the invoice and the purchaser enters the invoice then the tax authorities will come to know, oh boy, he’s not paid his taxes, he’s not showing the sale in his books. And that matching that the computer will do will bring to light any informal or illegal transactions that are going on in this country.
And, gradually, I think over a period of time, today, we have about 85 lakh SSCs in the whole country. Imagine, this country where we stay there are 6 crore traders and businessmen, 6 crores in a population of 125 crores. We have only 85 lakh registered people. And, I am not talking of registered only under one law or the other – excise, service tax, VAT, octroi, everything put together. There are only 85 lakh register dealers in this country. It’s another matter, that out of the 85, only 65 lakhs have registered in the GST network so far. I think it’s being opened up again on 15th June, if any of you has not entered or your clients have not entered, the old holders of account with VAT or excise with service tax, please enter and get into the GST network. You have time from now until 30thSeptemer, by 30thSeptemer all those who have an existing excise or VAT number or service tax number should migrate to the new GST network.
I think from 1st July you have started? Yeah! From 25th June to till 3 months after that, you have the time to enroll, if you are a new ….., if you are not paying taxes earlier and we are not going to sit and do postmortem. So, please don’t worry, forget the past. We believe in forgiving and forgetting the past, let’s move forward in this new age of India, new world that India is entering into. Anybody who has not paid his taxes in the past, need not worry. Am I right Mr Hariram? We are not going to sit and do a postmortem of the past?
Give your instructions, don’t harass anybody…..come into the formal economy. That was the purpose of demonetization, in demonetization also, if you recall Prime Minister Modi had invited everybody to join the formal movement, formal economy, get out of the old age of working and there is no intention to harass anybody for the past. The intention is to get more and more people to declare their business and their sales Honestly, get into the new GST regime, start showing your sales, declaring your purchases. And, this GSTN network has such analytical ability that, for example, if you have sales of more than 75 lakhs but if you suppress it and try to show your sales at 75 lakhs and go in for composition. But your purchasers, if they enter your invoice in their system, the computer will find out that your sales are more than 75 lakhs. SO, your ability to hide any sale is gradually going to get compressed and eliminated altogether.
So, the important point in this is, focus on honesty and you can sleep peacefully at night, none of these officers can harass you. Be honest and nobody can harass you. But for the dishonest, I think the GSTN Council has kept very heavy penalties. But, we will make sure that you get a good transition period while you are learning the new rules of the game, the new GSTN so that you are not harassed from Day 1. And, if anybody gets harassed while implementing GST, immediately contact your MLAs or your MPs and we will make sure that there is no harassment of anyone. I will give you my personal assurance.
Hari babuji, SamaseRaoji, Madhav, Vishwa Kumar – you will have to become the ambassadors of GSTN in your area. You will have to become handholding of all of your traders as long as they do it honestly. I remember I gave a personal assurance to the jewellers when the Jewelry Tax was introduced when excise duty on jewellery. I remember having meetings, I used to have long meetings to sort out that problem at that time and I gave my personal assurance that you will not be harassed. And this is about the one-year-old story. In one year, and I have given my mobile number also to everybody if anybody in the country gets harassed I said you contact mine.
You will be amazed in one year, not one person has contacted me, not one person. In one year, not one jeweller contacted me, if at all somebody got harassed, then there must have been something he is hiding or something wrong because of which he didn’t contact me. But, I got one person who came a met me unfortunately from Hyderabad. Of course, I am in Vishakhapatnam so that’s not a problem. Somebody came to me from Hyderabad, not the jeweller himself, some other party worker.
He said, bahut takleef ho raha hai wahan par, Ahmedabad mein bahut harassment ho raha hai. Sir batao, kya baat hai? Let me see. Bahut takleef hai sahib, hamare, you know they even try to put a caste angle to it, he said hamara samaj ko bahut tang kar rahehain! He was trying to get sympathy from you. I said, batao to sahi kya hua hai! You will be amazed at the story. This is after the demonetization. He showed me the papers and I will tell you what the harassment was. The harassment was that this gentleman, jeweller, had deposited Rs 40 crore cash in the first 7 or 8 days after 8th of November, 2016. And when it was enquired, not 40, sorry, Rs 95 crore cash. And when we enquired from him, the department enquired, I just saw the paper, I threw it at his face. I said never again show me your face. Rs 95 crore of cash deposited in his bank account in the first 8 days. In fact, Bank of Baroda refused to take his deposit, so he went to a neighbouring bank, opened a new account and deposited money there.
Then when the tax officials asked him, where you did you get this 95 crores from? He said, on the 8th of November, 5000 people came to my shop, each one gave me 2 lakh rupees or whatever amount in cash and purchased future jewellery from me. So the tax officials said, wow, 5000 people came, so it must have been a big mela, because announcement happened at 8 o’clock, time was up to 12 o’clock. In 4 hours, 5000 people came and each one gave 2 lakh rupees, How did you count it? He said I had 8 people who were counting the money. So, we said okay, give us the names of those 8 people or their address so we can talk to them. He said I don’t remember who these people were. They said fine but if 5000 people came, you must have had some security or somebody to look after it. After all, 95 crores you received that evening in 4 hours, everybody carrying bags of money and everybody less than 2 lakh, of course.
So, the security must have been there? He said they all run away! Now, tell me is this a case where, whether Haribabu or Samarasu or anybody is going to get involved or Mr Srinivasan Rao is going to get involved? Honest people – we will give our life for you. Dishonest people – we will not spare you! The clapping is not very enthusiastic about this. Are you happy about this?
So, as I was saying, all those who used to be forced to do corruption, now don’t have to worry, pay your taxes honestly, nobody can harass you. Enter all your sales invoices, sleep peacefully at night. Your purchase register will come automatically from those who have sold the goods to you. Your returns are auto-populated, auto-generated, once all sales come in and your tax rate is there in the sales, your purchases come in automatically on each one of which the GST collected is shown, the computer programme will calculate what tax you have to pay. It’s as simple as that.
So, whether it is your GSTN, GSTN-2A or 2B, they are all so simple. But, it’s not that you have to sit and burn the midnight oil and prepare returns like in the old days. It’s not as if you have to prepare one return for excise, one return for service tax, one return for VAT, all of that is gone. All you have got to do is enter your sales invoice honestly, nothing else. If I have made any technical mistake, because I am not an expert on GSTN, then, of course, Mr Hariram can correct it later on.
But, this is in fact, far simpler than what we were doing. I still remember when I was young and I was a student like these young boys and girls, and happily, I see that more girls seem to be interested in GST than the boys. Oh, the boys are there, I was amazed, I said what is happening. Not that, I am very proud that you are interested in it but I was thinking the boys are boycotting my programme. But, that’s the simplicity. And I must compliment honourable Finance Minister Mr.Arun Jaitley, Finance Secretary Mr.Asmukh Hadia, and the entire team in the centre and states, including our colleagues sitting here who have really put in their best to create a simple network, a simple system, a robust system.
Imagine, a country f 125 crore people, almost every day you will have 50-60 crore sales invoices, every day, which have to be entered in this programme. There is no comparable example in the whole wide world of this nature, there is nothing in the world which is as complex and as large as this programme. Now, tell me ladies and gentlemen, if we have a problem in our small 20 lakh – 50 lakh business, and we are implementing a programme where 40-50 crore invoices have to be entered every day, where crores of traders and businessmen will be online and entering data, accessing data, preparing their sales invoice. Obviously, there will be some difficulty, you know, it will take some time for the programme to mature, to stabilise, to settle down. And, unless you actually get into the water, then you learn to swim. Howsoever much beautiful practice you can do your hand and leg movements on the ground, howsoever much we control the temperature of water, less, more, the flow of water, the height of water, the depth of water; everything, end of the day, till you jump into the pool you won’t learn to swim. Which is why, 1st July is the right day, we have to launch it on someday, so why not 1st July.
And, of course, it’s also the foundation day of the Institute of Chartered Accountants of India. So, very appropriate day to launch it also.
June 19, 2017 Speaking at Launch of Energy Conversation Building Code, New Delhi