Tax exemptions for India Inc to be phased out says FM
Politics threatens GST schedule
While the implementation of agoods and services tax (GST) faced uncertainty on Wednesday, Finance Minister Arun Jaitley reaffirmed the government’s commitment to economic reforms, saying corporation tax exemptions would be phased out and weaker banks consolidated with strong ones.
In line with the Budget announcement of reducing corporation tax by five percentage points to 25 per cent in four years, Jaitley said the government would release a list of tax exemptions to be withdrawn in a phased manner. The aim is to align taxation levels in India with global standards and with those in competing countries.
“Over the next few days, we will come out with a list of exemptions, which we intend to phase out in the first place. In the next four years, corporation tax will come down by five per cent and a lot of exemptions will be phased out,” Jaitley said at a summit organised by The Economist.
While corporation tax stands at 30 per cent, the effective rate of taxation is 23 per cent, on account of a large number of exemptions. There are 38 different deductions extended to the corporate sector. In 2012- 13, the revenue forgone on account of such exemptions was Rs.68,000 crore
“Therefore, we will slowly bring taxation levels to global standards and make tax assessment and returns simpler by just eliminating alot of exemptions,” Jaitley said.
He added measures to protect the domestic steel sector from dumping by foreign manufacturers were being examined. Later in the day, an official statement said the director general of safeguards had recommended imposition of a 20 per cent provision duty on hotrolled non- alloy and steel alloys.
Jaitley said the government wouldn’t relent on pursuing black money cases in India or abroad. GST The roll- out of GST from April 1, 2016, is set to be deferred, with the Cabinet Committee on Parliamentary Affairs deciding to prorogue the monsoon session of Parliament. That essentially means the constitutional amendment Bill for GST could now be taken up by the Rajya Sabha only in the winter session of Parliament.
“Keeping the political reality in mind, at the meeting of the Cabinet Committee on Parliamentary Affairs, it was decided we will recommend to the President to prorogue the monsoon session,” Jaitley said.
It is almost certain that the April 1, 2016, deadline to roll out the goods and services tax ( GST) will be missed. The government on Wednesday abandoned plans to hold an extended monsoon session of Parliament and recommended the President prorogue it, or officially call the session to an end.
The winter session, scheduled for the end of November, is the next window. However, that session seems set to be as fractious as the monsoon session amid what promises to be a bitterly contested election campaign in Bihar.
This will inevitably affect the mood in Parliament and further derail the law- making schedule and, along with it, the GST Bill.
Initially, the government had planned to hold an extended monsoon session, sometime around August 25 and, in a swift threeday operation, get the Rajya Sabha to clear the GST Constitution amendment Bill. However, when it became apparent that the Congress wasn’t ready to play ball and other fringe allies, including the All India Anna Dravida Munnetra Kazhagam, weren’t on board, the matter was referred to the prime minister.
While Parliamentary Affairs Minister Venkaiah Naidu could scent the mood and made it clear that little would be achieved by an extended session because the Congress wasn’t ready to cooperate, Finance Minister Arun Jaitley at a meeting of the Ultimately, Prime morning, Jaitley was hopeful of the Upper House passing the legislation.
“It is only a matter of time before GST is passed; almost all parties are supporting it,” he said at an event organised by The Economist. He said once the Bill was approved by the Rajya Sabha, other steps would not take time, as the government was ready with supporting pieces of legislation, of which one had to be passed by the Centre and two by states. “ Our draft pieces of legislation are almost ready. We will require a meeting of the empowered committee to clear those and they can be passed. We need the IT backbone, and those handling the IT infrastructure inform us they are in a position to put it in place by April 1, 2016, comfortably... we are keeping ourselves in readiness,” Jaitley said at the event.
After a Cabinet meeting later in the day, however, the mood changed. Jaitley said the government had opted against an extended monsoon session “ for the time being”, as talks with the Congress didn’t yield results. On whether the government would be able to stick to the deadline of April 1, 2016, for rolling out the GST, he said, “ Your guess is as good as mine.” The GST Bill, passed by the Lok Sabha in the Budget session, was stuck in a political logjam in the Rajya Sabha, where the ruling National Democratic Alliance does not have a majority.
Business Standard, New Delhi, 10th Sept. 2015