Reserve Bank of India Governor Urjit Patel on Thursday said the goods and services tax (GST) will not only create a national market but will also broaden the tax base, which in turn will lower the overall taxes in the long-term. He also said he is not “overly pessimistic” about employment scenario in the IT sector, stating that mushrooming startups can compensate for job losses.
“The prudent point is that GST itself is part of the digitisation revolution, which along with the reforms on the information tax side in terms of the processes and operations, have the potential to broaden the tax base considerably,” Patel said at an event organised by IMC here.
Patel said GST is a precursor to a low tax regime in the country at a later stage. He said the broadening of tax base is an important outcome of the new uniform taxation regime and other initiatives on e-payments and digitisation. Besides creation of a national market, GST will also reduce many inefficiencies within the states while moving goods from within a state and also across the country, the Governor said.
On reports about big IT firms laying off people and going slow on hiring, Patel said, “I think we don’t have to be overly pessimistic at this stage.”
“While there could be pressure on employment in some of the IT sectors, it is not necessarily in terms of literally a job destruction, but may be the growth rate is affected by what is happening. The number of startups in that same space is almost compensating for most of this,” he said. Patel said there is a “contradiction” between what the reports say and what he hears from the industry. “When you talk to businesses themselves, I rarely hear about jobs destruction,” he said.
Regarding fintech, he said with the emergence of technology-enabled innovation in financial services there will both opportunities and risks to financial sector stability which need to be addressed by policy makers, regulators and supervisors, as many innovations have not been tested through a full financial cycle. “You really come to know what works and what doesn’t when you go through a full cycle. The decision taken at an early stage can set important precedence on what is the right time and the wrong time. Therefore, caution in this respect is not unwarranted especially when you consider that the world is yet to recover even from the 2008 global financial crisis,” he said.
Patel said even the country’s fintech industry has almost tripled its size since 2013 and the value of transactions has touched $30 billion already. The central bank has
taken several steps such as the licencing payment banks, Bharat Bill Payment System and launch of UPI, IMPS, among others to facilitate innovations, payment systems and digital banking, he said.
(With inputs from PTI)