Indian Finance Minister Arun Jaitley Image: Kim Kyung-Hoon/REUTERS
Even as voice of protectionism is getting louder in the developed world, such concerns are not visible in India despite the government opening up the economy in a big way in 2016. "Most decisions we took last year faced little resistance," Finance Minister Arun Jaitley said adding "a new India has emerged." He was speaking at the Vibrant Gujarat 2017.
While India is aspiring to grow from being a developing to a developed economy and Indians take pride in calling their economy the fastest growing in the world, it is still a substantially non-compliant society when it comes to paying taxes, he said. Demonetisation, he added, will integrate the informal economy with the formal economy. This will in turn lead to higher revenues and make the economy cleaner and bigger. "Excessive paper currency has its own vices and temptations," he said.
Three years ago, Jaitley said, India had fallen off the global radar. Policy making was difficult and direction uncertain. Politico-economic debate was not where we should be going as a country but what was wrong in the system, he said. Macro-economic data declined.
The elections in 2014 has ushered in a change, he said. A decisive leadership capable of bold and courageous decisions and the stamina to withstand criticism when such decisions are taken has brought India back in the global radar. In 2016 alone, he explained; Monetary Policy Committee was set up, Exit Laws were passed, double taxation treaties were reworked, GST Constitutional Amendment Bill was passed, subsidies were rationalised further and high denomination notes were replaced.
On GST, he said that under the current tax regime, India is not one economic entity. The central government taxed manufacturing and services while the state government taxed sales, luxury, entry of goods and purchase. "GST will make India one entity," he added.
While he refrained from spelling out the date of implementation of GST, Hasmukh Adhia, Revenue Secretary, Government of India maintained that the target date for its implementation continued to be April 1, 2017. He reiterated that GST will be a simple and a single tax which will ensure that from registration to filing return and paying taxes, will be easy.
Confederation of Indian Industry's President Naushad Forbes agreed that GST will be a game changer and will have a transformative effect on the economy as it will eliminate cascading effect of taxes. He said that if implemented effectively, it can add 1.5 percent to 2 percent to the annual GDP in the next 10-20 years. He said the decision now to locate warehouses would be taken on business grounds rather than rates of sales taxes. He used the opportunity to highlight a few concerns the industry had, such as the need to ensure that GST creates a single market especially when it comes to assessment and inspection, reduce scope for discretion in penal provisions so as to avoid harassment.