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Personal income-tax rate cut being considered among many things: FM

A cut in personal income-tax rate is among the many things being considered by the government, she said.

By: ENS Economic Bureau | New Delhi | Updated: December 8, 2019 12:53:34 am
nirmala sitharaman, finance minister, parliament winter session, parliament winter session 2019, parliament live, parliament session, parliament session 2019, parliament session today, parliament session live, parliament session live news, parliament session live, parliament session live today, parliament winter session today live, indian express When asked specifically if there would be some action on this front in the Budget, she said, “you will have to wait for the Budget.”

The government is working on more measures to improve consumption demand and support economic growth, Finance Minister Nirmala Sitharaman said on Saturday. A cut in personal income-tax rate is among the many things being considered by the government, she said.

On the ongoing issue of delayed compensation payments to states under the Goods and Services Tax (GST) regime, Sitharaman said the cess collected was inadequate to give a compensation of 14 per cent ·to the states but “will honour GST compensation to states”.

Explained

Eye on boosting consumption demand

The government is considering measures to revive the flagging economic growth. Many options such as personal income-tax cuts and giving stimulus, even if it requires digression from the fiscal glide path, are being discussed by the government. Boosting consumption demand, either directly or indirectly, would be a crucial factor to arrest the slide in economic growth at a time when the GDP growth slowed to an over six-year low in the second quarter of this fiscal year.

“So there are ways for giving stimulus for consumption. We are adopting a direct method and also the method through which we are spending on infrastructure, whose spillover can go to core industries, labour and so on,” she said at the Hindustan Times Leadership Summit 2019.

When asked if the government is considering personal income-tax rate cut for putting more money in the hands of people, the Finance Minister said: “One among the many things that we are thinking of.” When asked specifically if there would be some action on this front in the Budget, she said, “you will have to wait for the Budget.”

When asked about fiscal discipline, she said it’s a law and the government has to obey it but there’s also a view of learned economists who are “telling us to love towards funding and give more stimulus”, adding that everything is being discussed.

She also said the public sector banks have disbursed nearly Rs 5 lakh crore without compromising on prudential norms in the last two months to boost consumption in the hinterland. Asked if there could be more measures announced to bolster economic activity, she said, “If I say yes, it will be when and if I say yes it’s also going to be back to me saying are you not too close to the budget. So I don’t want to say yes although I am wishing I can say. At the same time, I will not say no, because we are working on more.”

GDP growth slowed to a 26-quarter low of 4.5 per cent in the second quarter, primarily due to contraction in manufacturing and weak private investment and consumption demand. Following the reduction in corporate tax rate in September, there has been a growing demand for a cut in the personal income-tax rates to give more money in the hands of people and boost consumption demand.

On the low consumer and business confidence in the country, Sitharaman said the intent of the government is to further simplify taxation systems including removal of exemptions. She said the government has already adopted faceless assessment for direct tax, which will soon be applied to more procedures and is being tried for indirect taxes as well.

The Finance Minister said the GST structure has been distorted due to successive rate cuts. “At the end of the day, the intentions were good..(tax rates) kept reducing, kept reducing. Now reduction per se is not bad…I am not saying that people did it thoughtlessly, but in the enthusiasm to reduce taxes, that framework which was originally agreed at stage one of GST was distorted,” she said.

Eventually, the rates have to be rationalised and the entire tax system has to be simplified, she added. “One, the tax per se, is getting complicated because of this unstructured bringing down of rates. Another, it’s also getting complicated because you want to be sure that you’re doing everything correct, but ending up asking for so much more information in a technology-driven system. People just get fed up of wanting to give so much information. So, we have problems in both hands,” she said.

She said the original intent was to have three rates under GST: merit, sin and the standard, but refrained from commenting on rate hike decision, saying the decision lies with the GST Council.

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