GST rollout from July 1 to make goods cheaper: Jaitley

GST rollout from July 1 to make goods cheaper: Jaitley

New Delhi: Hopeful of the GST rollout from July 1, Finance Minister Arun Jaitley today said it will create one of the world's biggest single markets and make commodities cheaper and tax evasion difficult.

Speaking at the 23rd Conference of the Commonwealth Auditor General, Jaitley said India has hugely a non-tax compliant society and the government banned higher denomination notes to curb the tendency of people to deal in cash that lead to tax evasion as well as terror financing.

He said the reform measures undertaken by the government will help India clock 7-8 % growth and retain the tag of fastest growing major economy in the world, but challenges remain in volatile global oil prices, reviving private sector investment and health of state-owned banks.

With regard to GST, he said the new indirect tax regime will ensure seamless transfer of goods and services, while stronger information technology backbone will make evasion difficult.

Despite being one political entity, India currently is not a single economic entity as there are multiple layers of taxation that make goods costlier. GST - first proposed in 2006 - will replace at last 17 state and central levies.

The biggest taxation reform what we are trying to implement from July 1 is Goods and Services Tax … It will increase the volume of taxation, there is no tax on tax and therefore makes goods, commodities and services little cheaper and far more convenient, Jaitley said.

The Union Cabinet this week cleared four supplementary GST legislations which will be introduced in Parliament in the ongoing budget session.

The laws which enable this (GST) are now before Parliament which hopefully should get cleared and once they do get cleared then by the middle of this year we hope to see the implementation as far as this law is concerned, Jaitley said.

In terms of tax compliances, he said India ranks fairly high as a non-compliant state.

Therefore, one of the efforts of the state has been how to bring non-compliance to an end. Once the GST is introduced it will be a great check as far as evasion is concerned, he said, adding that the government has amended direct taxation law by bringing in curbs on cash currency.

Jaitley, yesterday, in Parliament introduced an amendment to Finance Bill 2017 proposing to ban cash dealings above Rs 2 lakh.

Cash component of Indian economy was exorbitantly high about 12.2 per cent of GDP and of this, 86 per cent was high denominational currency and therefore the tendency to deal excessively in cash did exist and this created its own challenges for economy, he said.

Cash facilitated crime, corruption, incentivised tax non-compliance and was facilitator for funding terrorism and insurgency, he said, as he defended November 8 decision of the government to demonetise 500 and 1,000 rupee notes.

(With demonetisation) Anonymity which was attached to this high level of cash operating in market that anonymity disappeared as it had to be deposited in bank.

This has also increased the trend towards digitisation of economy, (will) act as disincentive to continuing to deal in a shadow or parallel economy and lead to a further integration of informal with formal economy, Jaitley said.

He said the size of India's GDP in the near future will be bigger, size of formal economy will increase and will be cleaner.

As regards growth, Jaitley said India would continue to remain amongst the fastest growing economies of the world.

For the last three years we have been the fastest growing major economy, we will continue to be in that phase. I think for India to achieve the growth rate of 7-8 per cent is reasonably logically plausible. If big growth returns to the world we probably can push upwards, he said.

Outlining the challenges for Indian economy, Jaitley said the government is now trying to address the problems plaguing the public sector banks and also increasing private investment.

We are hopeful that in the next few quarters, will probably see a better result as far as those areas are concerned, he said, adding oil prices remain an uncertainty for India.

The gross NPAs of public sector banks have risen from Rs 5.02 lakh crore at the end of March 2016 to Rs 6.06 lakh crore in December 2016.

PTI

On 7th Pay Commission implementation, private investment, Air India and more, here’s what govt is mulling over

On 7th Pay Commission implementation, private investment, Air India and more, here’s what govt is mulling over

Besides the government staff, economic analysts are keenly awaiting when and how the Centre will implement 7th Pay Commission award, which has implications for government finances (with estimated outgo of Rs 74,000 crore in FY16) as well as on inflation.

Also, with private investments yet to show decisive signs of picking up, the government has the difficult task of keeping the tempo in public spending, especially capital investments, at a time it is losing the benefits of low crude oil prices.

Finance secretary Ashok Lavasa speaks on these issues in an interview to FE’s Prasanta Sahu. Excerpts.

GDP growth in FY16 was put by the Central Statistics Office at 7.6%, with the growth in the last quarter coming in at 7.9%. Private consumption has been the growth driver. Despite the efforts by the government, private investors are yet to shed their diffidence. Among infrastructure sectors, highways, railways etc. have seen a turnaround but mainly because of government investment. How far is this model sustainable given the Centre’s (limited) fiscal capacity?
Many infrastructure projects, in which private sector has been involved, have started moving. In highway sector, for example, the hybrid annuity model has started attracting investors. As we go forward, we feel that the initiatives that have been taken by the government – to improve the ease of doing business and integrate various clearances – would give a push to private-sector investments. In infrastructure sectors, where the government plays a key role in awarding contracts etc, we are seeing positive results too. If all the factors are favourable, the GDP growth could be close to 8% this year.

The questions about GDP data refuse to wither away. Manufacturing GDP growth and the IIP (industrial production) data aren’t quite compatible, even if one considers the fact that apart from output, value addition is now being captured more efficiently.

The Q4 results of some of the major companies show that their EBITDA has increased. The variation between manufacturing growth (9.3% in FY16) and IIP (2.4%) was mainly due to the fact that some sectors did well while some did not.

How important are lower interest rates in reviving demand?
I think it’s a question of giving a boost to demand. Sometimes people may have more expectation than what RBI could do (in terms of lowering rates). The RBI has had to consider various factors and take a considered view. It is not possible to please all people all times. It is fair to expect that whatever lowering (of rates) has been done by RBI, finds an expression in the retail lending rates. I think the governor is right in saying full transmission has not happened of the central bank’s (cumulative 150 bps) rate cut since January 2015.

What will be the guiding framework of the “prospective planning” that will replace five-year Plan?
We could divide it into three parts: the period till which one can have some predictability on availability of resources, that will be, say, a three-year action plan. Beyond this, there will be medium-term (seven-year) Plan. Besides, there can be a prospective plan for theb period till 2030. In the prospective plan, what you already have is sustainable development goals, which are part of the international commitments. Niti Aayog will look at integration of issues and prospective planning while department of expenditure will make the fund allocations for various programmes.

Will substantial additional provision be needed to meet the Pay Panel-related outgo in FY17?
It will be too early and premature to say whether budgetary provision is not adequate or not. No one knows to what extent the government will accept the Pay Commission’s report. But, there is a provision in the budget to take care of the impact of the pay commission award (According to sources, FY17 budget has provision of about Rs 54,000 crore for honouring the pay panel’s award, but Lavasa refused to comment on this ).

Will Niti Aayog’s reported suggestions on strategic disinvestments in a clutch of PSUs including Air India be taken forward this year?
We haven’t so far received the recommendations you are referring to. We have to explore all forms of divestment and strategic sale is of course one of them. The Department of Investment and Public Asset Management will be looking at all possibilities and deciding on which unit to be put on privatisation or disinvestment or strategic sale mode.

Is there any move to monetise surplus land with defence, railways and ports bodies?
This is not to be done as a central government policy. The railways have been trying to monetise land. Certainly, this is one source of revenue, but it may be not a very significant source. Whenever an entity decides to take up any piece of land for monetisation, it has to consider all the legal issues, physical condition, its own plans of utilising and ultimately, if there is a market for that (in case of sale/leasing out).

Source: FE