Digitisation, GST to expand formal economy: Jaitley
Jan 11 2017 , Gandhinagar
FM sees potential for further growth
Speaking at a conference on goods and services tax (GST) here on Wednesday, Jaitley said there was scope for improvement, but declined to suggest what growth could be like next year.
He said digitisation that got a leg up post-demonetisation along with GST, will lead to greater expansion of the formal economy and boost growth.
“The two steps together will lead to a larger economy and a cleaner GDP. I am hopeful that we will see the two this year,” Jaitley said at the sidelines of the Vibrant Gujarat Global Summit.
The finance minister advocated the need of a cashless economy and explained why it was important for country saying, “Excessive paper currency has its own vices.”
He said that in terms of taxation, India is substantially a non-compliance society. The narrowness of our tax base is evident from the data, adding that when formal transactions expand, it can lead to higher revenues.
The finance minister also said that the one- nation-one-tax regime would lead to seamless and hassle-free transfer of goods and services in the country.
Before the Bharatiya Janata Party-led government assumed office in 2014, the country lacked a proper direction.
“The country needs bold decisions to reform the economy. India has become increasingly aspirational. A new India has emerged,” Jaitley said, adding the country has undergone ‘huge change’ over the past 2&1/2 years.
In an indirect reference to the US and the UK, he said while protectionism is debated in the developed world, there’s hardly any mention of it in India. While US president-elect Donald Trump has been critical of firms outsourcing jobs, the UK recently voted to break from European Union to protect its economic interests.
He also said while India was re-negotiating treaties since 1996, tangible decisions came only after the NDA government assumed office under Narendra Modi.
He was referring to the signing of the amended double taxation avoidance agreement (DTAA) with Singapore, Cyprus and Mauritius.
In the last week of December, India and Singapore amended DTAA for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income. India and Mauritius last year agreed on source-based taxation of capital gains arising from alienation of shares acquired from April 1, 2017, in a firm resident in India. Investments made before that would not be subject to capital gains tax here.
Similarly, the revised DTAA between India and Cyprus, signed in November, provides for source-based taxation of capital gains arising from alienation of shares, instead of residence-based taxation provided earlier.
On the GST logjam, Jaitley said the government was aiming to implement it from April. “There is a provision for GST implementation because constitutional amendment has been passed. It’s a constitutional necessity that before September 16, it should be rolled out,” he said.
Jaitley hoped the issue of dual control of taxpayers would be resolved at the next meeting of GST council scheduled for January 16. “We would want it to be implemented from April if all issues are resolved. But implementing it by September 16 is a necessity,” he said.