Goods and Services Tax (GST) Council is in the final stages of reviewing GST structure and a reduction of the levy would happen soon, union finance minister Nirmala Sitharaman, who chairs the Federal indirect tax body said on Saturday.
Speaking at the Economics Times Awards for Corporate Excellence in Mumbai, Sitharaman said that the ministerial group set up by the GST Council has done excellent work, which is in final stages now and that the minister would take one more look at the proposals and take it to the federal indirect tax body for decision making. This is expected to be taken up at the next meeting of the Council.
“We are very close to coming to a final call on some of the very critical issues—reduction, rationalisation of rates and looking at the number of slabs and so on,” said the minister, adding that the rates at present are lower than what they were when the indirect tax reform was rolled out in 2017.
The GST Council chaired by the union finance minister has designated state ministers as members.
GST rates have come down since the law was implemented in 2017, and the currently ongoing revision is also likely to lower the levy further, the union finance minister said.
“At the time when the GST was launched, the revenue-neutral rate was about 15.8%,” said Sitharaman.
Revenue-neutral rate refers to a rate of GST that would result in collecting the same amount of revenue before and after the GST roll-out from the items covered by the new tax system. It would not increase the cost of a product for a consumer, while also maintaining the revenue generated by the government through the levy.
“Since after the launch of GST, and till 2023, we had already brought that 15.8% to 11.4%, which means the rates have come down….So the clue that you are looking for is — it will come down even further,” Sitharaman said.
Sitharaman also asked industries to voice their opinions about investment to the government, at a time when private sector investments were concentrated in only a few sectors of the economy.
The union finance minister also said it would be unwise for her to comment on the issue of foreign institutional investors selling off stakes in Indian stock markets due to elevated capitals gains tax, as the parliament’s budget session had not come to an end.
The parliament is set to resume the Budget session on Monday, 10 March. Finance minister Sitharaman hiked the country’s long-term capital gains tax by 25% to 12.5% in July 2024 budget.
Sitharaman said the sentiment of faith in India’s potential was “missing”, leading to a growth rate of about 6.5-6.7% for FY26. She added that such a belief would enable India to grow at about 8% for the next fiscal.
Sitharaman said India was still the fastest growing economy in the world, at a sustained 6.5-7% growth in all post-Covid years, and across all sectors.
The economy, like capital markets, is also driven by sentiment, Sitharaman said. “If sentiments can govern our markets and therefore all of us will be buoyed at one point and completely watered down at the other, so is the economy,” she said.
The finance minister said dumping of goods into India is a concern, at a time when tariffs are being used aggressively. But, there cannot be complete stoppage of imports, as these imports are cheaper for small manufacturers, Sitharaman said.
The action taken against dumping of cheap goods should be after considering the inputs from all stakeholders, including small businesses, the finance minister said.
Finance minister Sitharaman said the union commerce ministry is currently engaged in reviewing multiple trade agreements and that were signed in the past, as these agreements allowed many foreign goods to enter Indian markets unregulated. She said these agreements were speedily concluded, and often had loose language.
“Today the commerce ministry is engaged in reviewing many of the FTAs signed, whether it is with Japan, whether it is with Korea, whether it is with ASEAN”, said Sitharaman.
“…there is just a flood of goods coming in that you are not able to regulate. Duties don’t make a difference to them because the FTAs allows it,” she added.
FTA refers to Free Trade Agreements, and ASEAN refers to the Association of Southeast Asian Nations.
Current negotiations over free trade or bilateral agreements included the lessons learnt from previous such agreements, she said, adding that putting India’s interest first was a priority in such negotiations.
“Unless you negotiate for India’s own good, even your negotiation will not be taken seriously by the other side because they are very clear on what they want,” she said.
Ensuring that India’s interests are included in the agreement, increasing the number of bilateral agreements, and keeping the language of the agreement such that disputes are avoided are the key principles which will be followed by India in trade negotiations, Sitharaman said.
Sitharaman also said the World Trade Organisation was ineffective in resolving trade disputes, making the clarity of language in bilateral agreements more important amid tariff uncertainties.
Source from: https://www.livemint.com/economy/gst-rate-cut-soon-tax-review-in-final-stages-says-fm-11741446945278.html
