Brainstorm on economy; GST rates to be cut on 60 GST soon
NEW DELHI : About 60 goods and services are likely to get cheaper, with Finance Minister Arun Jaitley expected to push for big tax rate cuts in the GST Council meeting on Friday as part of a broader strategy to help the economy claw out of a three-year growth slump.
Prime Minister Narendra Modi brainstormed for over three hours with Jaitley and BJP president Amit Shah on Thursday, taking stock of the current state of the Indian economy that is smarting under an untidy goods and services tax (GST) rollout and the lingering effects of demonetisation. According to an official, who did not wish to be identified, the Centre is going to propose GST rate cuts in many items that fall in the highest tax bracket of 28 percent.
PM Modi had in a speech yesterday refuted criticism of the government’s handling of the economy and promised steps to reverse the current economic slowdown. He also promised to identify and remove hurdles faced by small traders after the launch of the new national tax GST.
There are strong speculations that the government is likely to make some major announcements after the meeting, ahead of Diwali.Defending his government’s economic policies, the Prime Minister had yesterday hinted that he was ready for changes in the newly-implemented Goods and Services Tax laws.
PM Modi said this while responding to Rahul Gandhi’s criticism of his government’s demonetisation decision and faulty implementation of GST. The meeting also holds significance as BJP chief Amit Shah unexpectedly cut short his Kerala event and returned to the national capital to attend this meeting.
Besides, the GST rates on several goods and services may be cut from 18 to 12 percent. “A decision towards this is yet to be taken as it would require Council’s approval,” the official said. The rate cuts, if announced on Friday, will help boost household spending just in time for the pre-Diwali buying season. GST has a four broad slab structure – 5, 12, 18 and 28 percent – along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks.
The states would receive provisional compensation from Centre for loss of revenue due to abolition of taxes such as VAT (value added tax), octroi and implementation of new tax system. The compensation would be met through levy of a ‘GST Compensation Cess’ on luxury items and sin goods like tobacco, for the first five years.
The government also plans to introduce slew of measures to reduce compliance burden for small taxpayers struggling under the country’s new indirect tax system, GST that was rolled out from July 1. The Council may consider relaxing return filing timeline for small and medium enterprises (SMEs), defer reverse charge mechanism, and reopen registration for composition scheme for the third time to March 31, 2018 and hasten tax refunds for exporters battling cash crunch.
The Reserve Bank of India (RBI), which on Wednesday kept its key lending rate—the repo rate—unchanged at 6 percent, acknowledged that the disruptions from goods and services tax (GST) have worsened the broader economy’s prospects in the short term. The RBI also sharply revised the economy’s growth forecasts for 2017-18. The central bank now expects the gross value added (GVA) to grow at 6.7 percent in 2017-18 from 7.3 percent projected earlier.
India’s real or inflation-adjusted gross domestic product grew 5.7 percent in April-June, the slowest in 13 quarters. “The implementation of the GST so far also appears to have had an adverse impact, rendering prospects for the manufacturing sector uncertain in the short term,” RBI governor Urjit Patel said on Wednesday.
Amit Shah was due to take part in today’s march, which was scheduled to pass through Kerala Chief Minister Pinarayi Vijayan’s hometown. However, Amit Shah’s decision to cut short his Kerala schedule has come as a major setback to BJP’s ambitious Jan Raksha Yatra, which began in Kannur on Tuesday with a war cry against the CPM.
Neither the BJP’s media cell nor the state unit leaders have given any reason for his absence from padyatra.The BJP president was expected to attend programmes in Mangalore on Wednesday, which were cancelled too.While some state leaders said Shah’s programme has been cancelled, others said he might join the public meeting scheduled to take place this evening.
Sources in the BJP described the curtailing of the trip as “rescheduling” and added that the party president will be present on the last day of the fortnight-long campaign on October 17, where he is scheduled to attend the concluding ceremony in Thiruvananthapuram.
Shah had walked nine kilometres on Tuesday, from Payyannur to Pilathara, where he also addressed a public rally.Shah’s decision to skip the padyatra would also be a major embarrassment to its Kerala unit and its president Kummanam Rajasekharan who is leading it from Kannur to Thiruvananthapuram covering 11 of the state’s 14 districts.
The padyatra, with the theme ‘All Have To Live: Against Jihadi-Red Terror’, is part of the campaign of the BJP and its ideological parent RSS to “expose the political violence against their workers in the state by the Communists”.
