GST reforms transformative, will ensure tax certainty: CBIC chief

The goods and services tax (GST) reforms proposal announced this week will be 'transformational' for India's indirect tax system, Central Board of Indirect Taxes and Customs (CBIC) chairman Sanjay Kumar Agarwal told ET in an interview.

He said while the consumers and businesses may get instant relief, the reforms will go a long way in giving tax certainty and a stable GST rate for potential investors planning to invest in the country.

Agarwal said although the department has tried to remove all the pain points for the businesses and consumers, the reform process will not stop here. With classification-related issues settled, the department will focus its energy and manpower on the next reforms, tracking large wilful tax evasion cases and technical enhancement to make the system better.

He said revenue may remain sluggish for two-three months with the real impact of the rate rationalisation emerging only by December and the government will then take a call if at all the indirect tax target for the current fiscal needs to be revised.

"This is not just a rate rationalisation exercise but it is transformative and will give stable tax rate and tax certainty for large businesses who are planning to invest here regarding what will be their GST liability," Agarwal said.

He admitted that the classification disputes around auto parts, foods and other sectors was creating uncertainty in the mind of businesses and coming in the way of their investing in the country.

"All of these future disputes and litigation will now be settled with these reforms," he said.

For the ongoing litigation, the CBIC chairman added that the target is to make the GST Appellate Tribunal (GSTAT) operational by December.

Many states have already appointed members and the Centre will further expedite the process of getting infrastructure and appointment of members and supporting staff, which will reduce the tax litigation.

The chairman of the indirect tax body said such reforms were possible only with decisive leadership on the top, which gave the department free hand to fix the "lingering structural issues" rather than incremental tweaks here and there.

He brushed aside apprehension of opposition regarding rate cuts not being passed on to consumers, saying the majority of the "businesses were very positive regarding the reforms" and they had pledged their support.

"We do not see why businesses not passing on these benefits as this will help their own consumption and also in the age of social media, consumers have a wider platform to express any grievance," he said, adding that the government will be monitoring it anyways.

On Revenue
The CBIC chairman also dismissed the numbers floating in the media regarding revenue loss and said they are based on "assumptions" as it is premature to say how the reforms will pan out in terms of consumption boost.

"Initial two-three months the revenue collections will be sluggish but that will not be indicative of what will be the revenue collection. From the month of December, we will have clarity on how much is the collection with the new rates," Agarwal said, adding that once the trend emerges, they may revise revenue numbers.

He also said the reforms will boost the consumption cycle with more money left with people.

"When there will be more money in the hands of the common man, they will spend more, that will stimulate growth and will lead to further collection on those additional sales of goods," he said.