PM called me and said, 'GST mein kuch kaam kariye, ensure ease of compliance'

GST rates have been changed on nearly 400 items, with a reduction in the case of 375. The number of slabs has decreased, while several procedures have been changed. How tough was the task for you and your team?

■ The work didn’t start a week ago or 10 days ago. The group of ministers (on rate rationalisation) began working on it oneand-a-half years ago when former Karnataka chief minister Basavaraj Bommai headed it. Then Samrat Chaudhary ji (Bihar deputy CM) coordinated it. In fact, it was discussed during the Jaisalmer meeting of the GST Council last Dec, but we didn’t progress. There was also the issue of insurance, which was raised in Parliament , and a GoM was working on it.

Around eight months ago, before the Jaisalmer meeting, the PM ( Narendra Modi ) called me and said GST ‘ mein kuch kaam kariye ’ and asked me to look at it from the point of view of ease of compliance. Later, he suggested that we should look at GST rates and reminded me when we were discussing direct taxes (ahead of the Union Budget).

On Feb 1, when the Budget was presented, after finishing my engagements, I got down to working on GST. I started looking at every item, goods and services. I was very clear that we cannot look at things only from the point of view of revenue. Two, we cannot look at it from the traditional arrangement of chapter-wise classification of goods. The chapters are very good for commerce, but taxation must have a different approach.

I spent a lot of time regrouping goods, categorising them based on daily use, what the rich and poor buy. Then, there was the issue of aspiration. You may want to buy a bigger TV, or a bigger car, maybe an EV, or a bigger house. So, the regrouping was done from the user’s point of view, rather than just from the viewpoint of trade. I was also looking at it from the point of view of farmers, who are a very critical part of our economy. Then, there are MSMEs, which produce critical goods and inputs and are affected by the volatility of international markets and natural calamities. There was also the question of keeping in mind the interests of all critical players in the Indian economy, who need to be facilitated through an accommodative tax structure.



Once the regrouping was done, I kept asking questions on why an entire group cannot be treated similarly. I was aware of the whole controversy around popcorn (laughs).

The officers would often come back with their concerns, and I always kept asking them for solutions. The reason I’m saying this is not just to purely answer your question, but this infamous belief that bureaucracy probably circumvents everything that you want to do as a political representative. Bureaucracy has its own way of circumventing it. You must give a solution to all problems.

Also read: Full comprehensive list of items with revised GST rates - 5%, 18%, 0% & 40% effective September 22

There was also the issue of slabs, and I questioned the need for 12%, 18% and 28% slabs. We looked at all the items in the 12% slab, and everyone realised that it could be brought down to 5%. Now, 99% of the items, both goods and services, will be in the 0%, 5% or 18% slab. We have one slab for merit goods and another for standard. Predictability is the first thing. It will be a big blessing for GST.

We went to the PM in May. That’s when it started moving.

My God, it was like passing an exam with honours after a rigorous course in the Delhi School of Economics. I don’t know if I have passed it with a good rank or not. But it has given me great satisfaction, of working together with the bureaucracy, it was worthwhile. I actually feel very rejuvenated.

You had reduced the corporate tax rate in 2019, then came the income tax changes and the new law and now GST. Which has been the toughest?

■ That was a different kind of thing. That story can wait for some other day. This involved a bigger challenge because it was not just about convincing the Union Cabinet , we needed to take it to the (GST) council and convince everyone.

You are often attacked, at times personally, on tax rates. At GST Council meetings, ministers from opposition-governed states raised the issue of revenue loss, something on which they issued a joint statement days before the meeting. Was it difficult to get everyone on board?

■ It was an effort of sorts. Everyone seems to argue that lower rates are people-friendly and pro-poor. Every political narrative is that we are working for you, but it is also like ‘I will not allow this to move’. I could not take this contradiction beyond a point. If it’s peoplefriendly, then it should be supported. I said this in the council, too, looking at a minister, who persistently raised the issue of states’ revenue, that this was a dharma sankat . But isn’t it also our responsibility to emerge out of that? It’s not true that only the revenue of states is getting affected, the Centre is an equal stakeholder. Is it not a dharma sankat for me as well? We had faced a similar dharma sankat when we reduced income tax — the fear of losing revenue. But when money flows into the pockets of the people, then should I only bother about my revenue? That is not possible. The political narrative for any party is to work in people’s interest and ready a scheme. Here, the scheme was ready.

There was an argument that the Centre should compensate states in case of revenue loss. But the fact is that there is a gunny bag in the middle, where the Centre and the states together put the revenue. In case the revenue drops, then all of us have to work hard to rebuild the corpus. I don’t have a separate suitcase. I am also getting money from the same TOI gunny bag. That mindset of Centre compensating is incorrect. Haath jodke, kaan pakadke — we don’t do it in the South — I said, during Covid , on PM’s instructions, we vaccinated 140 crore citizens and there was no burden on the people or the states. We are also assisting states on capital expenditure, which was not recommended by the Finance Commission. It is being done because Modi ji was a CM and he realises that states need support. In these times of tension, there is also defence expenditure, which is entirely the Centre’s responsibility. So, I said, ‘please let’s all rise to the occasion.’

Given the fiscal implications, will you be able to meet the fiscal deficit target?

■ There will be no impact.

Is there scope to do something for exporters, who are seeking govt support due to the US tariffs?

■ We are working very hard to put in place a package. We will work it out soon and the GST cuts will have no bearing on that.

Will it include concessions on loans for MSMEs?

■ Let’s see what we can do in the package. We have to be ready with something. We want to extend support and cannot wait.

There are concerns over how govt can get industry to pass on the benefits of rate cuts to consumers, without invoking the antiprofiteering provisions…

■ That work is underway. We are in talks with industry, and we are trying to understand if they can pass on the rate cut. There is no scope for not passing on the rate cuts; it has to be done. We are seeking an assurance from them. Public sector insurance companies have announced, private sector counterparts should also do so. I understand that a leading Indian car manufacturer has just announced a model-wise reduction in prices, transferring the gains to buyers. We are keeping a close watch on prices and MPs have told me that they will be doing so in their constituencies. Ministries are also in talks with the sectors concerned. From Sept 22, my entire focus will be on this.

There are some concerns from automobile dealers on adjustment of the cess, insurance companies are talking about loss of input tax credit constraining them. Is there scope to review these concerns?

■ There will be some transitional arrangements, and the Central Board of Indirect Taxes and Customs is working on it. It will issue clarifications.

What will be the impact on growth and inflation, since GST cuts will boost consumption, especially in light of global uncertainties?

■ This has neither been done because of the global situation, nor is it due to the pressure of (US) tariffs. As I said, we’d been working on this. This was due, it so happened that it happened now. It will certainly have a positive impact on managing inflation, which is already at a very low level of 1.55%. This will help sustain it.

Given that this will spur demand, do you expect private investment to pick up?

■ Once rates come down and demand goes up as people consume more, more people would want to produce, so existing capacities will widen, and new investments will come. This is a key step towards a virtuous cycle beginning for the economy.

Within minutes of the GST Council meeting getting over, Congress had issued a statement and some of its prominent faces have argued that this is what the party had been suggesting for several years. How do you respond to this?

■ I wish they had seen the press note and then commented on this — they could have understood the issue in depth. Second, they are speaking in different voices. The person who called it Gabbar Singh Tax is still saying that it is not One Nation, One Tax yet. Their former finance minister concedes that it has happened, but says it has happened too late. It is implied that it’s a good thing, although it happened late. I am upset because they are arguing that we purposely kept the rates high in 2017 and now we are lowering them. They need to understand that there were four slabs and if a product in the pre-GST period was at 7% it went to the 5% slab; if something was at 10%, it was put in the 12% slab.

The principle was to fit it to the nearest slab based on what different states charged before GST, 5 or 12 or 18 or 28%. It brought one particular item from different states to one rate. It was an introductory stage. Now, we are classifying all edible items or household items into one rate. Over the last eight years we saw that classification problems compounded issues. We have also reduced rates. Our 140 crore countrymen need a better opposition, not this one; a good opposition that can help people understand things better and which speaks honestly, instead of misleading them and remaining in opposition for 15 years.

A former chief economic adviser, who was in office at the time when slabs were finalised, has said that there are nearly 45 GST slabs. Is it over-interpretation?

■ Yes, absolutely. It is fairly straightforward, there may have been 45 rates across states before GST, for the same soap bar or for the same toothbrush. But it is absolutely incorrect to say so after GST was implemented.

Rating agencies have upgraded India’s sovereign rating, citing robust growth and the fiscal consolidation record. Still, there are people overseas and in India who are referring to India as a ‘dead economy’. How do you respond?

■ I am not worried about anybody overseas telling me this, whether he is a head of state, or a prime minister or adviser to the president. I don’t feel the need to take their names. What saddens me is if an Indian citizen repeats the same allegation and hits out at govt. Ours is the fastest-growing economy, which will soon be the third largest economy in the world. It is because of the strong macroeconomic fundamentals that we have been able to undertake major reforms. How can you call it a dead economy? As I said, we need a good opposition. Even if you don’t do it with govt, you must counter these statements. The opposition should respond strongly. India is the fastest-growing economy because of the hard work of its people, the opposition must say so. It should be pointed out that because of the strength of our people, we are able to export so much, resulting in a trade surplus in India’s favour, which is upsetting some people.

How would you assess the overall impact of the US tariffs on the economy? Do you think that some of the investments that were flowing in with the hope of tapping the domestic and export markets will be affected?

■ Globally, people have understood what is going on. You see so many people who have come to invest in India, or to do business in India, or to come and talk to prospective businesses in India, saying this is where the economy is dynamic and robust. Many economies are just not moving. So, when an economy is giving you obvious signs of dynamism, robustness, and prospects for future growth, they are very clear that what is happening against India is not due to trade considerations, it is not the reason why your trade agreement couldn’t be signed. I can see that today people are making independent judgments and not getting influenced by a perception, which is coming out of some countries. So, nobody has stopped doing business with India. There are lots of newer investors and joint venture partners seeking partnership.



The US has raised concerns about India buying oil from Russia and imposed an additional 25% tariff. How will govt deal with it?

■ It is our decision to buy commodities from the place of choice and depending on our requirements. We will be buying Russian oil.

You have given a major concession on insurance premium. How will it boost your goal of ‘insurance for all’ and how are we preparing for a situation a few years down when the share of senior citizens will rise?

■ It is not just about senior citizens or pensions. The step we have taken, the need for comprehensive reforms is also required for Viksit Bharat. The target is not too distant, around 20 years from now. If benefits don’t reach the people and their purchasing power is not enhanced, they will not be able to move ahead, whether it’s a buyer, kisan or MSME . We are using this as a lever to give people relief and reach the target of being viksit (developed). The focus is on GYAN : garib (poor), yuva (youth), annadaata (farmers) and naari (women), who are across categories, whether rural, urban or various castes. We are giving money directly to them instead of transferring money after the state earns revenue.

Also read: Piyush Goyal calls GST rate cuts 'historic', slams Cong for its 'high-tax legacy'

How do you see stock markets emerging as a wealth creator?

■ Earlier people only had the option to invest in fixed deposits. Now people have many other options. Of course, there is risk in going into speculative segments. There may be challenges, but this is the best period for the Indian economy. We have come back strongly from Covid, inflation is low and we have strong fundamentals amid global uncertainty. The entire credit goes to the people of India.

Land and labour reforms have been pending for some time and there have been suggestions that you create a GST Council-like entity to deal with states.

■ We can always look at alternative institutions that can solve the current problems. But institutions that can solve these problems are already there. We can make them more effective. The institutions should understand the sensitivities of sectors and act accordingly.

While FDI inflows have been strong, outflows, too, have been high. There is also talk of regulating outflows. What is govt doing about greater inward investment flows?

■ The outflows need not always be negative. Because of the trade agreement and other opportunities, our companies are investing in other countries. Our policies are quite flexible for attracting investment. The areas which were under govt have all been opened up. In the space sector, for instance, I understand there’s a huge demand. People want to come and make satellites here and launch for different countries, which is a commercial operation now. It’s no longer a govt operation. An openness has been created and these are things which our youth have taken up.

Is there a possibility of a review of Press Note 3, as industry has been demanding, and also in light of the recent developments with China?

■ Already, there is some flexibility. We are allowing experts to come where there is a project on the ground so that there is no problem when technicians come. We will be looking at some particular sectors where we want the technology experts to come in.

A lot of people are falling prey to cyber fraud. Regulators, govt and other agencies have taken steps. What more can be done?

■ I am not shifting responsibility, but any number of awareness campaigns will be insufficient. You must build greater awareness and tell people about the risks. Second, systems have to be improved. We should speed up things for people who have lost money. Very few people get their money back and those who do, get only a small portion of the money. If we are able to do that a bit more efficiently, there will be greater confidence.

You have taken several reform measures in the last few months. What’s next?

■ Shifting to Kartavya Bhavan (laughs)!