Jaitley hints at minimal disruption, says gains from lower rates should be passed on to consumers.
Finance minister Arun Jaitley said rates under the new goods and services tax (GST) regime will not be “significantly different“ from existing levels, suggesting there will be minimal disruption when it is rolled out on July 1. But any savings should be passed on to consumers, he said.
“We are now in the final stages of fixing tariffs for different commodities. The formula under which it is being done has also been explained and therefore nobody is going to be taken by surprise,“ he said. “It's not going to be very significantly different,“ he said, adding that rules and regulations governing GST have been framed.
GST is one of India's most significant economic reforms in decades and will erase barriers bet ween states to create a common market that will lower costs and increase efficiencies, thus potentially boosting growth by 4.2%, according to a US Federal Reserve paper.
Speaking at the annual session of the Confederation of Indian Industry (CII), the finance mini ster said companies should pass on to consumers any benefits of lower levies under GST as it will eliminate the current compounding effect of different central and state levies.
The GST Council, headed by Jaitley and comprising representatives of all the states, is scheduled to meet in Srinagar on May 18-19 to finalise tax rates on different goods and services after subsuming at least 10 indirect taxes under GST.
The GST Council has finalised four slabs--5%, 12%, 18% and 28%--after unifying levies such as central excise, service tax and value added tax (VAT).
The finance minister observed that the GST Council has held 13 meetings and has never had to resort to a vote on any issue due to differences, deciding matters through consensus. “And therefore all states representing different political complexions, have all agreed (on the GST structure),“ he said. Jaitley said the council is of the view that any benefit accruing from lower tax rates under GST should be passed on.
“Profit is not a bad word but unfair enrichment is. And therefore the benefit of reduction in taxation is a benefit that consumers are entit led to. And that's not a principle that can be seriously contested,“ he said.
He said the dismantling of the Foreign Investment Promotion Board (FIPB) is almost done and this will prepare the ground for more reforms in FDI policy.
“I am now in the final stages of doing away with the FIPB because 90% of the investment in India comes under the automatic route. So for the balance 10%, do we need multiple forums to give approval, or we need just one forum in one ministry?“ Efforts are being made to simplify the direct and indirect tax structure, he added.
Jaitley, who also holds char ge of the defence ministry, said a policy to encourage domestic defence manufacturing is almost ready. “We are in advanced stages of formulating a policy where we can ensure that instead of just being buyers... on the strength of technological and other tie-ups, India also becomes a manufacturing economy.“
The Economic Times New Delhi, 29th April 2017
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