THE IMPLEMENTATION of the Goods and Services Tax (GST), coupled with a digitised economy ushered in by demonetisation, will make India’s economy “look much cleaner and bigger”, said Union Finance Minister Arun Jaitley at the Vibrant Gujarat Global Summit Wednesday. “Most of the issues have been sorted out. Some critical issues remain. These critical issues, I hope, over the next few weeks, we will try and solve them,” said Jaitley, while addressing a seminar titled ‘GST: Game Changer of the Indian Economy’.
“Once it (GST) is implemented, the combination of a more digitised economy with a more efficient tax system, I am sure, will make India look much better. It will make our economy look much cleaner and bigger. I am sure Indian industry and assesses, and states, will eventually cooperate and make these two moves highly successful,” he said.
Linking demonetisation to GST, the Finance Minister said, “The impact of demonetisation — if I may diverge from GST for a moment — can’t be delinked from this (GST). Excessive paper currency has its own vices… When we release data, we then realise the narrowness of the tax base itself. And once this entire bearer currency, which has anonymity and no history, moves back into the banking system, and is accompanied by a digitalised economy, which the Prime Minister spoke about yesterday, it is going to be a major step towards the integration of informal economy, which at times was also a shadow economy, with the more formal economy. This itself is going to increase the transactions, which are covered within the banking system. Transactions, which may lead to higher revenue in the future, make us go compliant, and give us a cleaner and bigger economy.”
Jaitley said, “After the transient impact of this is over. Once it is coupled with the historic implementation of GST itself, which has so many advantages… When GST merges all this, and makes India into one entity, it leads to a seamless transfer of global services across the country.”
The Finance Minister said that steps taken by the government in 2016 will change the way “Indians live and spend in future”.“The number of steps that have been taken are going to be significant because they are going to change the pattern in which India and Indians are going to live and spend in future. It will have an impact on the course of our future lives,” he said.
The minister also mentioned the steps taken to control the flow of black money from overseas destinations. “Since 1996, we have been repeatedly negotiating and renegotiating all the treaties — the double taxation avoidance treaties — with countries, which in effect was facilitating the round-tripping of money. During the last calendar years, we renegotiated and rewrote the Mauritius, Cyprus and Singapore treaties, which was part of the government’s larger desire that the shadow economy should not be allowed to prosper.”
Talking about the opening up of the Indian economy, Jaitley said, “A new India had emerged, which is evident from the fact that while the world is moving slowly today and you hear the voices of protectionism in the developed world, the debate over protectionism is hardly heard in India. And that is an indication of how aspirational, open and progress-oriented Indian public opinion is increasingly becoming.”
CII chief bats for simple GST provisions
Listing out the industry’s concerns at the seminar, Naushad Forbes, president, Confederation of Indian Industry (CII), said, “Some of the provisions (in the current draft of GST) can be made simple and transparent in such a way that there is no scope for discretion and harassment. I know there are many tax officials present, but I must say that in my career I have not been struck by the angelic nature of tax officials and we should not rely on the angelic nature of tax officials for tax being collected to be transparent and effective.”
Forbes added, “There needs to be a single basis of assessment and inspection… Second, using the invoice value as the only basis for valuation of goods. This could create transparency and will provide a complete elimination of all discretion on how goods must be valued.”
The CII chief further said, “There are two provisions in the current draft of the GST law, which raise concern for the Indian industry. First, there is a provision for arrest of industrialists for non-bailable offences, which cover five different potential offences. The current tax law provides one provision for a non-bailable offence. Second, there are clauses of profiteering, if decrease in taxes are not passed on to consumers.”