Jaitley dusts GST files, presses fast-forward

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Reviews disinvestment agenda, gold duty options

Jaitley dusts GST files, presses fast-forward
The Narendra Modi government has straightaway turned its focus on the goods and services tax, which analysts and economists say is crucial to boosting manufacturing and speeding up the sagging economic growth.

Desperate to get the economy back into the fast-growth mode, the government on Wednesday gave the first indication that it might prioritise the much-awaited tax reforms.

On his second day in office, finance minister Arun Jaitley got the revenue department to give him a detailed briefing on the long-pending issue and was said to have expressed his keenness to meet the state finance ministers at the earliest to thrash out the thorny issues.

Some projections show this comprehensive indirect tax overhaul can add 1.5-2 per cent to GDP growth every year. The new indirect tax system, originally scheduled for rollout on April 1, 2010, has missed several deadlines since due to political hiccups at the centre, disagreement between the Centre and the states on the compensation issue and a delay in putting the necessary technology in place for its rollout.

If and when implemented, the GST will subsume all indirect taxes of the Centre and value added tax of states. States have been bargaining for adequate compensation as they fear GST will cut into their revenues.

“There is unanimity that GST will pave the way for revival of the economy and, therefore, the government should chalk out a quick plan for its rollout as soon as possible,” said M Lakshminarayana, managing partner, Deloitte.

Industry body Ficci has listed cleaning up of the tax system, including implementation of DTC and GST, as its topmost wishes from the new government.

It has published a 40-page agenda for the government for ‘mission mode’ action and bold decisions for tangible outcome over six to 24 months.

The BJP, Congress and the Left had all pledged in their election manifestos to work towards GST rollout to ensure a modern, simple and transparent tax system at the Centre and state levels covering the entire production and distribution chain of goods and services.

Congress had introduced the necessary constitution amendment bill in Parliament to enable the Centre to levy tax on the sale of goods and to facilitate the same for states with regard to services. The bill has since lapsed and needs to be introduced afresh in the new Lok Sabha.

All the BJP-ruled states had opposed the draft on constitutional amendments for GST, saying the proposal to give powers to Parliament for constituting the GST council would destroy fiscal autonomy of the states.

During Wednesday’s presentation by revenue secretary Rajiv Takru, the demand for reversing the 10 per cent duty on gold imports also figured. The duty was hiked to curb imports to rein in the burgeoning CAD, but it also increased smuggling of the gold and shrank gems and jewellery exports.

With the CAD coming under control, the jewellery industry now wants the imports duty slashed. Over the past three months, RBI has relaxed a number of restrictions that it had imposed on gold imports to tackle the trade gap.

Share sale in public sector undertakings was another important item on Jaitley’s agenda on Wednesday and he was briefed in detail by disinvestment secretary Ravi Mathur.

The immediate focus will be on the sale of the government’s residual stakes in Hindustan Zinc and Balco. “We will go ahead with appointing valuers for stake sale in Hindustan Zinc and Balco, but cannot give a time-frame for the stake sale,” Mathur later told journalists. The government holds 49 per cent stake in Balco and 29.5 per cent in Hindustan Zinc, equity assets that can fetch the government up to Rs 20,000 crore. The Anil Aggarwal-led Vendanta group had brought majority stakes in these PSU companies during the previous NDA regime.

Mathur’s department was also in the process of identifying sick public sector enterprises for a possible disinvestment. Sick PSUs like HMT, HMT Chinar Watches, Bihar Drugs & Organic Chemicals and Nagaland Pulp & Paper are some of the names on the government’s radar. Big-ticket disinvestment was one of the poll promises of the BJP.

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