CHENNAI/NEW DELHI: Ahead of a crucial meeting of the GST Council starting Wednesday, finance minister
Nirmala Sitharaman on Tuesday said the proposed rollout of next generation reforms in eight-year-old indirect tax will make an economy absolutely open and transparent and further lower the compliance burden, helping small businesses thrive.
At an event organised by City Union Bank, she pointed to the reforms taskforce set up by PM Narendra Modi to ease compliances and said: "Complementing this, the planned rollout of the next generation GST reforms with a council meeting tomorrow (Wednesday) and the day after, and in the coming months, it will set an economy absolutely open and transparent."
Apart from shrinking the number of main slabs to three - 5%, 18% and 40% - by moving goods and services out of the 12% and 28% brackets - the Centre has circulated a plan for simplifying the registration and filing system to ease the burden on businesses. In any case, fewer slabs will end the classification concerns of businesses.
The Centre has proposed that all food items and textiles products should face a 5% levy, instead of them being scattered across multiple rates. Similarly, white goods are proposed to be included in the 18% segment, with mass use products such as refrigerators, large TC sets and air-conditioners seeing the GST drop from the current 18%. Sin goods and a handful of luxury items, such as large cars, will face 40% tax, with the cess likely to be done away with. There is intense lobbying from industries, particularly automobiles and textiles, on the issue of rates.
A critical element of the entire strategy is to get all the states on board, a challenge for Sitharaman as the head of the all-powerful body comprising ministers from the states and three UTs (Delhi, J&K and Puducherry). Opposition ruled states have upped the ante ahead of the meeting, arguing that they should be compensated for revenue loss. On its part, the Centre has argued that it too stands to take a hit for a few months, but the proposals are such that higher consumption will ensure that collections bounce back to current levels.
The changes in GST are also seen to be critical to boost domestic demand, and make up for some of the hit that some businesses may face due to the 50% import duty slapped by the US on India's exports.
Sitharaman also urged banks to expand credit, fund infrastructure and MSMEs. "The guiding principles for this transformation must be trust, technology and transparency." she noted.
She also said that scheduled commercial banks have seen a massive improvement in their asset quality. "The macro stress tests that we do have shown such results that the scheduled commercial banks' aggregate capital levels will continue to remain above regulatory minimum even under these adverse stress scenarios," she said.