Examining all glitches on Goods and Services Tax (GST), Finance Minister Arun Jaitley on Thursday said it would be difficult to accept Congress’ demand to cap GST rate in a Constitution amendment bill pending in Rajya Sabha even as he remains hopeful of passage of the key bill. With current reforms are at place, the Finance Minister is also hopeful that there is scope to improve growth rate, if not double-digit growth.
Explaining the rationale, Jaitley said, it is extremely difficult to accept because every time you need to increase tariff in a given emergency, you have to amend the Constitution and the tariff needs to be decided by the GST Council and not by a Constitutional cap. “I think that’s the only glitch that remains. I would still want the Congress party to come on board. I can easily see and this is going to happen at this stage of biennial election. The numbers are significantly changing and in any case, I am reasonably confident that the numbers in the Upper House now also are in favour of GST,” he said at the India Today Conclave here.
The landmark legislation, the biggest indirect tax reform since Independence, seeks to replace a slew of central and state levies with a uniform GST rate to convert the country into a customs union. “In the lok Sabha, the Congress walked out, every other party voted in favour. The Congress party has now made a statement that it has only one issue about the Constitutional cap which is a little difficult because our tariff is not decided through Constitution amendment,” he said.
The Congress, the original author of the tax reform, has called the Bill pending in Rajya Sabha as ‘flawed’ and wants the Government to cap the GST rate at 18 per cent. The legislation has already been approved by the lok Sabha but is pending in Upper House, where the ruling NDA does not have a majority. After it is approved by the Rajya Sabha, the legislation needs to be approved by half of the 29 states so as to roll out GST possibly by October 1.
Asserting that it is extremely difficult to achieve double-digit growth in the current global environment, Jaitley said there is scope for improvement from the current rate if reforms are carried on. “I don’t claim that it is possible in this global environment to come anywhere close to double-digit growth. It’s extremely difficult, it’s practically impossible to do that,” he said.
Jaitley also said given the various variables India can at least aim high and improve. “For example, if you carry on some of the pending reforms and if you concentrate on some of these areas like manufacturing, investment in agriculture etc. If you can improve health of the banking system so as it supports growth, your private sector becomes more oriented to investment. If you are not able to go anywhere close to double-digit growth, the prospect of greater economic activity and improving upon your present rate is always there. The idea is to improve upon our growth rate even in the adverse global environment,” he said.
Terming the current 7-7.5 per cent growth ‘impressive’ compared to the global growth, Jaitley said, compared to our own inherent ability, one always feel that India can do much better. If India has to increase growth by 2 per cent from the present capacity, he said, a combination of several factors would be required including a supportive global environment and increasing share of manufacturing in economy.
On the Compensatory Afforestation Fund Bill, the Finance Minister said the report of the Parliamentary committee has come. “Over the last 8-10 years, the Supreme Court compelled us to have compensatory financing for forestry. We have Rs 45,000 crore lying in the Compensatory Afforestation Fund Management and Planning Authority (CAMPA) fund and nobody knows how to use it,” he added.