You have set up such a lovely office here, I thought it’s an opportune moment to take him up on his offer. It would also give me a chance to meet cost and management accountants, I haven’t had a chance to really have a lot of engagement. And, I also just like last time, while I was coming for that wedding I had called on honourable Chief Minister. Today, while coming to meet all of you in this programme, I took the opportunity to review the power sector performance of Tamil Nadu. And, I have just had a wonderful meeting with the honourable Chief Minister, Thiru Palaniswamiji. And just like that day, the Tamil Nadu embarked on a new journey on power sector reforms. I think today is also, in some sense, a similarly momentous occasion that from 1st July, 2017, the nation has embarked on, probably, the most transformational reform on the finance, on the economic side that the country has ever seen – the Goods and Services Tax regime.
I compliment the people of Tamil Nadu. I compliment each one of you professional brothers and sisters. In some sense, the institute slogan is – Tamso Ma Jyotirgamaya – let there be light. And, I still remember my own booklet at the end of first year, when I completed one year as a Minister of Power, Coal and New and Renewable Energy, Mines was not my portfolio at that time. The title of the book was ‘Tamso Ma Jyotirgamaya.’ And, I didn’t know I have so much connect with your organisation.
But, in some sense, the GST being launched in July of 2017, is really reflective of your logo, because I see the nation progressing rapidly and moving towards a future where we will be recognised as a nation of honest businessmen, as a nation of honest professionals, as a nation of honest government, and the world will look up to doing business in India. The world will want to come and invest in India. We in India, as proud citizens of our beloved motherland, will enjoy living and working in a country, which is rid of corruption, which is rid of black money, where we can all flourish in our businesses, compete in our work, not on our ability to evade taxes, but on our ability to serve the people honestly, serve the people with good quality goods, serve the people with good services.
And that game-changing reform, the GST, I am delighted to note, is also a symbol of India’s strength, not as a fragmented polity, which some people have made it out to be, both within the country and internationally, but as a country which truly believes in collaborative, cooperative and consultative federalism. Because, the GST is one law, which has been passed unanimously by every political party in the country. This was passed, constitutional amendments and other laws in parliament by unanimous support of all the political parties, irrespective of their ideology, irrespective of their like or dislike for Prime Minister Modi or for the BJP.
The Tamil Nadu also supported this wholeheartedly. Every party in the country, even if they may not be in government in any state, even if they had only one MLA in some state or the other or one MP, also supported the GST. So, you can imagine that what a powerful medium this is to change the destiny of the country that everybody buried their political differences and on one platform have agreed to implement GST in the country. 17 GST Council meetings were held before the 30th June to take all decisions related to procedure, system, rates; which were all decided unanimously by all the participants.
The central government, which had otherwise got the unrestricted power to fix service tax, excise, all of that, gave up all that right into the hands of the states. After all, the GST Council has 30 members, 29 of the states, only 1 of the centre. Of course, the states also have given up their right on several taxes, and 17 taxes and 23 cesses have got subsumed into the GST. And, therefore, I say that the GST is not an achievement, is not to the credit of Prime Minister Modi or Mr Jaitley or the BJP or anything. It is the credit of Team India. It is the spirit of Team India. It is the joint and collaborative effort of everybody in India, all the states, all the political parties, people from all across the country.
And, therefore, it is also the collective property and the collective responsibility of all of us in this room, of all the people of India. It is going to change the destiny of India, and very easily, Prime Minister Modi could have chosen to try and say that I have got this done. After all, central government had a major role to bring in this kind of unanimity, something which hadn’t happened for 14 years, was able to be concluded in 2017 with a great deal of persuasion, effort, hard work, burning the midnight oil.
But, Prime Minister Modi has consistently credited all the political parties, all the state governments, because truly this could not have been possible without everybody’s collective support. Which is why, of course, when we were celebrating the launch of GST, also we were desirous that everybody comes into that programme, celebrates together the economic independence of India, the thing which will change how we have done business, how we have run our lives for the last 70 years.
And, ladies and gentlemen, I have studied this GST procedure, the system law; words are inadequate to compliment all those people who are behind the drafting of this system, the procedures. Because, truly the way they have created and crafted this whole scheme, it will become near impossible. I am saying near impossible, because sometimes our ingenious mind comes out with some…. Of course, I am sure all of us professionals will ensure the success of GST and we will not allow anybody to cheat or evade paying taxes. But, really the system is so well designed that it will become nearly impossible for anybody to cheat on their taxes anymore.
There are so many checks and balances within the system. Earlier, what would happen is, excise office was separate, VAT was separate, service tax was separate, all separate offices. Even if you did an illegal transaction, you didn’t pay your tax and one department caught you, you could always settle with him and then move away. Others would never come to know. Now, there is one system for the tax, so if somebody tries to hide a transaction in one end, somewhere-somewhere somebody may put in a corresponding transaction by which this transaction will get detected.
So, really it’s a opportunity for the whole country to change the way we think, change the way we do business, change the way the country has for the last 7 decades carried out its affairs, conducted its business to a new era of honesty, high level of integrity. Where everybody will compete on their ability, on their quality of goods and services, and not on their ability to cheat or evade taxes.
So, in that sense, I am sure that all my professional brothers and sisters from the CMA community will play a very-very proactive role in the rollout of this new Goods and Services Tax. I was very happy when I saw that you are going to discuss the various aspects of GST as CMAs, the role of CMAs in making this a success, maybe creating help lines, help desks all over the country where CMAs can also help small business, small traders to register, to understand the system, understand how input credit has to be passed on to customers, ensure that there is no inflationary tendencies, people don’t cheat that they keep their input credit and charge extra, double GST to the consumers. All of these are important responsibilities that all of us professional brothers and sisters should carry out.
After all, the purpose of GST is that cascading effect of taxes can be eliminated, goods are taxed at every level only for the value addition, input credit is taken for whatever taxes are paid at the previous stage and on the value addition you add the tax and pay till it goes to the next step of the value chain. But, it’s also incumbent that we all keep our eyes and ears open.
There are friends from the media here. They have a very important role to see inflation doesn’t occur, because if traders or if business persons or anybody who is associated in the value chain does not pass on the input credit to the consumers, because the consumers will have to suffer taxation twice and it will lead to false profiteering. Of course, for that the government has provided the anti-profiteering laws, by which they can check anybody who is not passing on the input credit honestly.
But, ideally, we would not like to use those powers. They should act like a deterrence. It should not become harassment for the business and trade community. If everybody shows their business honestly, reports their sales honestly, then there will be no need to have too much of supervision on the way people conduct their business.
I think the way the whole process has been designed will lead to simpler work, easier work. It will lead to less harassment; because now the computer system will throw out the triggers if at all somebody is not reporting his sales correctly. A lot of misinformation is being carried out. Some people are saying that taxes have gone up, whereas, the reality is that in most products taxes have actually come down. Tax rates have been set based on the existing cumulative taxes, all these 17 taxes, 23 cesses, together, whatever was the burden on each product. That’s how the tax rates have been set, procedures have been made. Central government has not made anything, it’s collectively made by the GST Council, the state, centre all working together as a team.
So, even if tomorrow I want to recommend any change or I feel there is a genuine request from somebody, I can’t do anything about it, even the Prime Minister can’t do anything. Only the GST Council is empowered to amend, change, increase, decrease, revise, whatever. And, obviously, since they have been elected by all of you, you can at least trust that all the governments will keep monitoring the situation. If any difficulty is found, if any rate results in exorbitantly high tax collection, or if any rate results in much lower tax collection than what was happening in the past, these are things that the fitment committee and the GST Council will keep monitoring going forward.
But, the important thing is that we should all join the GST mechanism, join it with positivity, not with scare or negativity or fear or anything. And, as we go along, if there are any transitional difficulties, obviously, they can all be resolved. One other misinformation being conducted is that 37 returns have to be filed. I remember I used to run industry, that time I had to file tons and tons of returns: separate return for VAT, sales tax, separate return for service tax, separate return for excise. And like that each of the cesses there used to be new return, separate assessment, harassment.
I don’t know if any of you have run industry, but most of you here are professionals. But, anybody who has experience in industry will tell you that if you reach your factory in the morning and you see a white Ambassador parked outside your factory. And, if God forbid, in that white Ambassador there is that round circle, Mr Rao pardon me. If on the back of that white Ambassador, because when you are coming in, you see the back of the car, if there is a round board, which says ‘Collector of Customs & Central Excise’, then you can be sure you are not going back home tonight.
Don’t you want to be rid of all those hassles and headaches? And, against that old system of returns and forms, and data for every department, what is the new system requirement? And, I am saying it, as a brother professional with all of you, as somebody who has studied the system and, if you ask me frankly, I could not have designed a system half as good as what they have designed that all we have to do now is just prepare a excel sheet or a statement of our sales and nothing else. Forget returns, this is actually a mistake that they have done, all these officials. If they had checked with Murli, you would have given them the right advice that you don’t call it returns; you just say every assessee will file one statement once a month. That’s all.
There will be no returns in the GST system, which is the reality; because all you have to do, but honestly – if you don’t write your sales statement honestly then there will be a problem, of course. But if you show all your sales – I sold so many goods to Mr Murli, his GST No. is so and so, value of goods is so much, tax collected so much, total value so much – that’s it. There is no prescribed invoice also, format, etc. people are talking, no format. You just have to give the GST No., value of goods, the HSN Code if applicable otherwise describe the goods and the tax collected. That’s it. Nothing else.
After you have prepared a statement of sales, your purchase statement is going to come automatically, as they call it auto-populated or auto-generated, from the sales that other people will enter – honestly – that is the catch word. So, you at best, initially, in the first few months till the things are getting streamlined, you will match your own purchases with the invoices that are auto-populated to make sure everybody has written your GSTN No. correctly, everybody’s entered the sales invoice honestly. God forbid, you find some sales invoice somebody has not entered, it’s not showing in your purchase. You can make a phone call and tell him that looks like by mistake you have not entered or you have entered it wrong, please enter it now.
Nowadays, phone call is also free for that matter, almost free if I may add. If somebody is choosing not to enter his sales invoice, maybe he doesn’t want to pay his taxes honestly, whatever. You have the right to enter his invoice as your purchase and once you enter it as your purchase, it will show as a sale in his system. So, he can’t run away from that sale.
And the second statement is generated like this. If you may have purchased something, which is from an unregistered dealer, you will pay the GST as a reverse charge and immediately take credit. You will get the credit right away once you pay it. And that also, there is a purpose, it’s not that we are unnecessarily harassing you or anything to make the payment and take credit. Purpose is that up to 20 lakhs people are exempt, 20 to 70 lakhs composition scheme, and with that almost 80-85 people will have nothing, no real significant paper work also to do. But, I won’t take Murli’s name, but let’s say Piyush Goyal does not show his sales honestly. And I say I am below 20 lakhs, how will the computer know whether I am really below 20 lakhs. So this reverse charge mechanism will show you that.
Suppose I sell 1 lakh to her, 2 lakh to him, 3 lakh to him, and I am actually selling 1 crore rupees worth of sales. But I am choosing not to show it, pay tax on that and I will say I am below 20 lakhs. But all of them will pay reverse charge and take credit. So, my name will come in the computer, the computer – no human intervention – triggers will come from the computer. That is the use of technology. This is what digital India is all about. Computer will find out, my God this Piyush Goyal says he is below 20 lakhs, but so many people are benefitting from his benevolence, which is why that reverse charge. So, nobody thinks that we are only trying to create more people work for you.
And the third information that you have to give, along with the payment of the net value added tax, is also auto-generated. Once your sales you have entered, it shows how much tax you have collected, purchase register comes automatically, it’s auto-populated. It shows how much credit you will get. And the net of the two is your third statement, along with which you have to pay your tax. That’s it.
At least for us professionals, it should not sound daunting at all. People will get used to it slowly. Any new thing – now you tell me, you moved into this office Murli, right? Was it a smooth sailing all throughout? When you first came in, you tried to put the air conditioner, did you not find that oh, some earthing wire is not properly put up. You brought a cupboard and you put it up and you found the wall may be slightly at an angle. So many things happen.
When you are moving into a new office, when you are starting a new business, new profession, forget anything, when you bring a new television in your house, hundred things, difficulties you will find. The stand doesn’t take the load, the wall doesn’t fit in correctly, it’s at a little angle, you are adjusting them, speakers, wires are loose, so you are tightening them. You do that all the time. Whatever change. And, you know, there was somebody, during demonetization, he had sent a Whatsapp message, and it’s a very telling message. And the people of India, the 125 crore Indians understood it. Some political leaders did not understand it, unfortunately. But, the people of India understood that what Prime Minister Modi is doing is good for India and they showed their gratitude to him in every election after that, they supported him wholeheartedly.
In the history of Uttar Pradesh, never 325 seats out of 400 to any party. In the history of Uttarakhand, never 58 seats to any party. People appreciated it. But, that message, Whatsapp message was – ‘You are finding it so difficult to stand in a queue to take out your money from the bank, just this much is bothering you so much. Imagine how much trouble Mr Modi must be going through when he is trying to transform a country as large as India, a country of a 125 crore people. It can’t be simple, obviously. And that is where the role of us professionals becomes even more important, the role of officials like Mr Rao becomes even more important.
We have to be that helping hand. We have to guide our colleagues, our clients, how to do the business. Make it simple for them, don’t complicate it. Explain it in simple ways. There are so many help desks, some 5000 seminars and conferences the department has held, both in all over the country, many must have been held in Chennai. Wherever required, our officials are willing to come, as many more seminars, as many more get-togethers, of any trade, of any association, of anybody, of consumers. They are happy to come and conduct the seminar. Anybody has any question can walk up to any office.
I hope you serve them tea also when they come there, or filter coffee, then I will also come there. But, it’s a great opportunity that we all have to serve our motherland. It’s a great opportunity we all have to do good for the people of India. You know, in one of my interactions like this, somebody got up and asked me a question which immediately felt like a Googly, in cricket. He said, why should I pay my taxes? I was taken aback. But, then think about it ladies and gentlemen. When you gave up your LPG subsidy, and I think many of you in this room must have given up your LPG subsidy. Prime Minister made only one appeal under the Give It Up that why don’t we all people who can afford to pay the full value give up our LPG subsidy, and today that LPG subsidy which you gave up is going to provide a free LPG connection to a BPL house, a Below Poverty Line family, to our mothers, our sisters who otherwise had to cook with wood or coal – 400 cigarettes going in every day.
With your blessings, your support, what you gave up, has gone to provide a decent living for our mothers and sisters who today don’t have to take 400 cigarettes’ smoke, but using LPG can have clean cooking oil, which will save their health, save their children’s health. Doesn’t it feel good, don’t you feel proud about it? Don’t you feel happy about giving up your LPG subsidy? Tax is the same thing. When you pay your taxes honestly, remember that it goes to provide education maybe to a poor child, to provide healthcare to somebody in a remote village, to give electricity connection to some poor family in a remote part of India. It helps to transform their lives also.
And I think, each one of us someday, somewhere might have had some roots in the villages, in our hometowns. We have boarded the train and come to Chennai. We have boarded the train and received God’s benevolence, and a good happy life. Don’t you think everybody in this country is entitled to that happiness, entitled to a better quality of life, entitled to healthcare, entitled to education? Should not that child in that tribal village of Jharkhand not be eligible for quality education, just like your children and my children get?
When we cheat on taxes ladies and gentlemen, remember, we are the cause maybe of some child being malnourished. Remember that when we are cheating on taxes, we may be responsible for a family, which 70 years after independence has not got electricity, not getting electricity. We will be responsible for that woman in Odisha whose son had to carry her on his shoulder, because there was no medical facilities around his village. You all saw that on television. Should we not, collectively, try to serve that section of society?
And, after all, the taxes we pay, it all goes back to the state. When you pay Rs 100 as tax, Rs 50 is central, Rs 50 is state. So 50 goes straight to your state government, out of the balance 50, 42% is devolved to the state as per 14th Finance Commission, so another Rs 21, becomes Rs 71. Then there are so many centrally sponsored schemes on health, education, infrastructure, electricity, water. That money also comes to the state. So, more than 85% of the money collected as this tax is going to go back to the states to serve the poor of the states, to serve the farmers in your state, to serve the economically and socially marginalized sections of society.
And, therefore, ladies and gentlemen, my only appeal to each one of you, let’s collectively work to make GST a grand success. Let us not be daunted by these transitional little difficulties. Any big change will have certain adjustment time, we will get used to it. GST Council will keep meeting, any genuine issues come up, we will solve them, collectively, in the GST Council it will be discussed and resolution can always be found.
Of course, protests through things like strikes and bandhs is not the solution. Dialogue is the solution. One has to first enter into the mainstream. Many people who want to avoid getting into the GST net should reflect whether they are doing the right thing. When the nation is moving towards honesty, let us all be a part of that movement towards honesty. Let us all work together as a team to fulfil the mission that each one of us hopes and prays we will be successful in that by 2022, when the country turns 75 years of independence, every citizen in the country will have a home of his own, or his family, 24 hours electricity, clean drinking water, good healthcare, good education, good infrastructure in the villages. Let us make India once again a superpower, that Sone ki Chidiya.
And that will not be possible, ladies and gentlemen, unless we all work together to make this game-changing transformation, the biggest reform that independent India has ever seen into a success. Let us work with that can-do spirit that we can do it, we can be successful. We will succeed. We will achieve our goals. And, I have absolutely no doubt in my mind that we will make this a grand success.
A small word of caution, which also I hope my friends from the media will carry to the people of Tamil Nadu, as consumers, since all of us are also consumers, let us be conscious to ensure that price doesn’t rise anywhere. Business, traders, manufacturers, all give the input credit honestly when they are selling goods at every level. Because, after all, taxes have not increased, on the contrary, cascading effect of taxes has come down. So, if everybody passes on the input credit honestly, then the cost of any good need not go up, save and except one or two exceptions. There may be a few exceptions where in fitment or adjustment there may be a small nominal increase.
By and large, all essential commodities, particularly, used by the middle class, the lower middle class, the poor, has been ensured to be kept in such a way, the tax structure, that prices actually come down. So, I will appeal to all of you, as conscious consumers, be conscious that nowhere prices are going up in the garb of GST. If it is, inform the tax authorities so that we can take the necessary action. Raise your voice if anybody is not giving you the input tax credit. And, as professionals, and really cost and management accountants can play a very important role in this whole GST rollout to ensure that input credit is carefully calculated and passed on. I would urge you to hold a campaign across the country, take product after product, particularly, those of essential nature of our sisters here – family goods, footwear, garments; even sanitary pads for that matter, where a misinformation campaign is being done that prices will go up. Actually, prices will come down because the input credit they get on the raw material can be fully set off, otherwise, that input credit would be lost.
And, of course, the self help groups who make in the smaller scale, up to 20 lakhs is exempt, up to 75 lakhs only 2% on manufacturing, and at the time of sale only 1% under composition scheme. So, really it’s a misinformation campaign sponsored by some large companies who are trying to make profit out of GST and bring down their cost. If at all they are so much concerned, they should reduce their costs and stop making so much profit rather than trying to make a false misinformation about GST.
Similarly, on the textile and garment trade, a lot of misinformation, because credit is going to be available to offset against the amount they will have to pay. But, we are always open for dialogue. Sanitary napkins – one more thing I must tell you, particularly, the 12% was kept otherwise the cheap goods from other countries of low quality will come into India, flood our market and take all our people who are manufacturers of sanitary pad out of business, and all the jobs will be lost in the country. By putting 12%, particularly, the imports will have this 12% burden, whereas small manufacturers being exempt will become more competitive and we can create jobs in India and keep the manufacturing in India, rather than importing bad quality goods which are giving jobs to other countries not to our brothers and sisters.
One last point I want to make, there is some set of people who are trying to criticize, first they supported GST, fully…….. One leader of a political party, of course, I don’t know how serious he is about India and about Indians, because half the time he spends he spends abroad, not for working. It’s not that he’s got some lot of work to do abroad. But, he said the tax should not be more than 18%. You heard that? Fine, we are very happy. It’s a good thing. But then, two things can happen.
One is if the tax from BMW cars, Mercedes cars, should be brought down to 18% as he is demanding. After all, which are the goods which are more than 18%? 5-star hotel bills, BMW cars, luxury cars! Now you tell me, ladies and gentlemen, should the people who can afford it not pay a higher rate of tax, so that goods of essential nature, which the poor of India are using, can be kept at concessional 5% or 0% or 12%?
Are we a country like France or Canada where everybody earns 50,000-70,000-90,000 dollars per capita income, where they can probably afford to have one rate, two rates of tax, or are we a country whose per capita income is only $1800, barely 3% of those countries, thanks to the misrule of years and years of that same – maybe even family I can say, forget the party. And, now they are fighting to reduce the GST on Mercedes and 5-star hotels, is that the campaign or the desire of that non-serious politician? Does he want that burden to go on the poor? Does he want that burden to go on the farmer? Or does he want that taxes only fall so the government cannot serve the needs of the poor and the farmers, and schedule caste, scheduled tribes, socially marginalized sections of society? It is really shocking how insensitive some people can be.
And, therefore, I think what has been prepared and planned by the GST Council in its collective wisdom where 6 members are also of that same political party who have unanimously approved all these rates. There are even two communist members from Kerala and Tripura. I don’t know why they are suddenly developing cold feet. Probably, they found that the people of India have liked this. They suddenly find that yes, this will be good for India. And anything good for India, they have to oppose.
I remember when I had first proposed auction of coal mines, so that through a transparent method without any corruption coal mines can be auctioned honestly, and everybody can bid and the money that comes in will be available to the states to serve their people, to do social welfare. When I was trying to pass that law, only three parties opposed it. Though it’s not relevant to GST, of course, here everybody has supported, at least on the face of it, now some may have second thoughts. But only 3 parties opposed and it’s not difficult, ladies and gentlemen, for you to understand which 3 opposed.
We are on camera, I will tell you afterwards. Because I don’t want to politicise the Institute of Cost Accountants of India programme. But, when you think, look back or go into the debate you will find that it is absolutely understood and one can understand easily why honest transparent auctions those parties cannot accept and what is the track record of their own performance. So, I think it’s time everybody understands that the world is watching India and we are watching ourselves also. It’s a time for us to be proud. It’s a time for us to feel good. Because, we are being the change that we want to see in the world. We are all participating in changing the way India works. We are making a difference to the future generations of Indians who want to live in a country where honesty is the norm.
Wherever I go, the biggest support I get is from youngsters. They say we don’t want to do business like our father and grandfather. We don’t want to keep registers – kaccha, pakka. In the night, I want to go and have a nice, while I am in Chennai, probably, you will prefer to go and have channa batura whereas in Delhi or Mumbai like to go out and have Idli wada in the night. But, that’s the strength of our country.
So, go out, have a nice channa batura in the evening. Watch a nice movie, hopefully, after the taxes or local additional taxes are reduced. And then sleep peacefully at night without worrying about that white Ambassador outside your office.
Thank you very much.
July 9, 2017 Speaking at GST Event, New Delhi