Finance minister Arun Jaitley said the government will attempt to press ahead with implementation of the goods and services tax (GST) from April 1, 2017, pitching the proposed tax reform as a key priority for the government.
He said restoring banks’ health was a priority but ruled out privatisation of public sector banks for now.
“…If we look ahead, its (April 1, 2017) a very stiff target we are running against time. I would certainly like to give it a try,” Jaitley said, when asked about the timeframe for rolling out GST at the India Summit organised by The Economist on Wednesday.
He said the procedural formalities for the Presidential assent are on and once the assent is granted the constitution amendment bill will be notified.
Parliament has already given nod to the bill that has been ratified by the requisite number of states.
He admitted that there were some pending issues, which the GST council, to be constituted after Presidential assent, will have to resolve.
“So there is a lot of work to do and if you are able to successfully transact those issues, then in the winter session of Parliament, the central legislations, with some drafts in public domain, will have to be brought in…The states will have to pass their own legislations.
The finance minister said the GST, once implemented, would have a “transformational” impact by creating a seamless national market in the country for the first time, while also acting as a transfer mechanism that would aid poorer consuming states.
Asked about the revenue neutral rate, he said it would be revenue neutral and while meeting all expenditure requirements, not hurt consumers.
“It (GST) will plug the leakages. In the long run it will probably stabilise the tax rate and move them down once effectively implemented,” he added.
The minister did not indicate any rate but an oft quoted study by the chief economic adviser has pegged it at 18% though the standard rate can be lower at 16.5%.
The challenges before the government is to put public sector banks back on track and continue to operationalise stalled infrastructure projects to further boost economic activity Jaitley said.
“We are trying to consolidate some of the banks, which may otherwise find it difficult in a competitive environment,” he said.
“I don’t think that public or political opinion has converged to the point where we can think of privatisation in the banking sector,” Jaitley said.
The government currently owns stakes between 60% and 86% in nearly two dozen state-run banks.
He pointed that in funding large part of social sector in India, public sector banks, despite competition, had a far larger contribution. “Some selective reforms do take place, for instance, we have announced a policy that government holdings (in banks) to be brought down to 52%,” he added.
On stressed assets, he said the Centre has initiated a large number of steps to reduce NPAs.
“There is not a single sector that we have left out in terms of resolving issues… if you were to ask me after the passage and may be possible implementation of GST, while that process is on, what would be my priority at the moment, it is certainly the health of public sector banks,” the finance minister said.
He also hinted that the government is ready to provide an additional capital over and above.`25,000-crore amount announced in the Budget. “This is over and above whatever assistance from the Budget we are giving towards the capitalisation of banks.”
On growth he said India is still far below our best, Jaitley said, while rejecting any criticism of the data put out by the Central Statistical Organisation.
“They are a very responsible and professional organisation. They revise their methodologies and at the end of the day various international institutions, most importantly the IMF, accepts their data,” he said.
Jaitley was responding to a question on a report in an international publication that has suggested that India’s growth was 4.3% if calculated on old methodology. The GDP growth stood at 7.1% Q1 of the current fiscal.
Please don’t forget once you revise it with effect to a particular cut-off date, and thereafter you use the same formulation and increases would be measured in the same formulations itself.
“I think if you actually see the extent of activities going on in India, probably this kind of analysis, of course economists are free to make an analysis, would not be a very fair comment,” the FM said.