We are very hopeful that in the second half of the Budget session, we will be able to get the GST constitutional amendment passed,’ Minister of state for finance Jayant Sinha told Mail Today in an exclusive interview last week.’
Within a few days of his 53rd birthday on April 21, India may get its biggest reforms gift. Minister of state for finance Jayant Sinha is confident that the Goods and Services Tax (GST) Bill will be passed in the second half of the Budget session beginning April 25.
“We are very hopeful that in the second half of the Budget session, we will be able to get the GST constitutional amendment passed. Every party apart from the Congress has indicated their support. As long as the Rajya Sabha is functioning well, we should be able to secure the majority,” Sinha told Mail Today in an exclusive interview last week.
He said his government was willing to find common ground on the three conditions the Congress has laid out. “They are still insisting on having 18% in the constitutional amendment itself. But the FM has said it would be quite extraordinary to have a certain rate in the Constitution in that manner. That wouldn’t be the right approach,” said the MBA graduate from Harvard.
The collected and distinguÃ© Sinha, among the relatively young ministers in the Narendra Modi government, spoke on the Panama papers, black money, beleaguered tycoon Vijay Mallya and the much-debated jewellery cess.
A Budget for middle class?
He sought at length to dispel the criticism that this Budget – which had no tax breaks, concessions or enhanced deductions but an added Krishi Kalyan cess – was anti-middle class and punishing on the honest taxpayer.
“This is an excellent Budget for the middle class. There’s been some relief in terms of affordable housing, fiscal deficit management. By sticking to the fiscal consolidation roadmap, we have made it possible for the RBI to reduce rates as well as to improve the liquidity situation of banks,” he said. “By doing so, RBI rate cuts could be transferred to the middle class. They get a tremendous boost to their disposable incomes as EMIs of housing loans, etc, come down.”
Minister of state for finance Jayant Sinha.
Sinha said the government’s fiscal prudence has brought inflation down from the “8-10% range during the UPA regime to the 5-6% range”.
“When you look at a thali and say dal prices have gone up, you should also look at the roti, chawal, ghee, sabzi, eggs, dahiâ€¦ These have all remained steady so overall prices have been under control. Prices of gas cylinder, petrol, diesel have come down a fair bit,” he said.
He said what the government was doing in roads, railways, public services, education, digital infrastructure and other areas was “transformational” and would profoundly benefit the middle class by improving the quality of life.
Tax pains and gains
He said while the total number of taxpayers was increasing every year, the real issue was whether people paid the right level of taxes. “In the corporate side, we feel we can do better,” he said.
“We are not collecting as much as we should in taxes,” Sinha argued. “India’s tax-to-GDP ratio is 16-17% whereas it should be closer to 20-21%. May be even higher when you compare it to China and other large, emerging economies.”
On whether banks were slow to pass on the benefits of rate cuts to businesses and consumers, he acknowledged that more needed to be done.
Sinha said while lower rates were desirable, it has to be balanced with inflationary concerns and expectations. “The RBI has very correctly suggested that inflation in India should be 4% plus-minus 2%. We have to bring inflation down to those levels,” he said.
Sinha reasoned against protests that broke out over the introduction of 1% jewellery cess.
“GST is hopefully going to be implemented in a year. Jewellery should be included. Therefore, it is important to begin the process of bringing the jewellery industry within the purview of excise taxes,” he said, citing that many states like Delhi already have VAT on jewellery. “Jewellers must remember that the cloth merchant and others next to them are paying sales taxes.”
Minister of state for finance Jayant Sinha.
The colour of money
On Mallya, he said, “All wilful defaulters will be prosecuted.” Whether the banks will take a haircut will depend on the terms of the offer. “Those are commercial decisions that the banks make, not policy decisions of the government. Banks have to decide how they deal with willful defaulters, non-performing assets, etc,” he said.
He said finance minister Arun Jaitley had clearly indicated that the government was instituting a multi-agency group to investigate cases mentioned in the Panama papers leak.
“Our government has done more than any other government on black money. We also have an SIT looking into it. We introduced the Foreign Black Money Act. In this finance Bill, we have introduced a mechanism to deal with hidden and undisclosed income. We have proceeded in a very swift and thorough manner,” he said.