Speaking at the 18th edition of the Hindustan Times Leadership Summit, Sitharaman appeared to suggest that apart from the economic downturn before and after the pandemic, frequent adjustments in GST rates negatively affected revenue collection.
“Ideally, I have been requesting that the council not decide at each of its sessions to change the rates up or down. In fact, it alters the calculation of income generation. As a result, the states or the Center’s planning that this year expect so much from GST must be recalculated every three months after a council meeting, “he said.
“As in the Budget, issues related to taxes, particularly rates (GST), can be addressed once, so that for at least the next 12 months, there is a predictable course. I am sure the GST Council will not hesitate to discuss and take a call on this, “said Sitharaman.
The minister’s suggestion comes at a time when the central and state governments are facing an acute income crisis stemming from the economic recession, as well as frequent tax cuts.
However, experts said that frequent tax rate cuts in the early years of GST implementation had helped fine-tune the new tax system and keep it flexible, although it came at a cost to the treasury.
“While GST’s rate changes in the past meant the flexible approach taken to address the issues businesses face, it is necessary to have a defined process and periodicity for future rate changes,” said MS Mani, partner at Deloitte India.
On signs of economic recovery, Sitharaman said that the current spike in GST collection in the past two months is not just the result of stifled demand and that the recovery is likely to continue in the coming months.
“I’m not sure if the pent-up demand or the festival demand will explain more than ₹1 trillion monthly revenue in GST for two months, “he said.
“Yes, this is the season where the holiday demand adds a little more fervor to the demand, which prevails in a year, but I also speak with industry leaders, such as core sector industries such as cement, iron and steel, they are looking for capacity. expansion. It is an indication that the additional demand is what is coming in and is likely to continue, “he added.
On inflation, which has forced RBI to halt its cycle of rate cuts, Sitharaman said he is not concerned about the high level as it is seasonal in nature.
“The increase in raw material prices is mainly seasonal. The government observes changes very frequently, accepts conscious requests for imports and solves logistical problems. The bump in inflation will ease. I don’t see food inflation continuing, “he added.
When asked whether the RBI’s reluctance to cut monetary policy rates further puts additional pressure on the government to take more fiscal measures to revive the economy, it said it would need a delicate and continuous real-time balance by monetary and fiscal authorities to reactivate the economy. .
On Friday, the RBI projected the Indian economy to contract 7.5% in fiscal year 21, better than the 9.5% contraction it projected just two months ago.
Regarding the coronavirus vaccination program, Sitharaman said that he needs to know the cost per dose and cycle of the vaccine to decide how much to allocate in the Budget.
“As of today, we do not know if it will be one dose or two doses or if it is necessary to administer recurring doses after six months. Whatever vaccine is approved and once it is approved I need to know the cost per dose and the dose cycle, only then can I think of a number, “he said.
On an RBI panel’s recommendation on granting banking licenses to large corporations, he said the issue had also been discussed in the past. “RBI itself has not taken a position. These are not new discussions or discussions that are happening only now and right under this governor. These discussions have occurred under previous governors. Decisions have been made based on this before, “he said, adding that NBFCs have received banking licenses in the past.
Shreya Nandi contributed to this story.
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