Committed to a transparent and predictable tax regime - Arun Jaitley
SPEAKING at the Peterson Institute in Washington yesterday, the Finance Minister said,
Taxes: The fundamental dilemma about taxes is that they are both necessary and problematic. Managing that trade-off requires good economics and better politics. Taxes should promote savings and investment and hence growth; The tax net should be wide so that all citizens feel they are part of government; but rates should be low because taxes after all forcibly transfer money from citizens to the state.
GST: For ten years we have been saying GST is about to be implemented. We have done it. We will pass the bill in Parliament in the coming 3 weeks. GST is a modern tax, a consumption-based value-added tax, and a tax that avoids tax cascading
Benefits: Create a broad tax base and will strengthen revenues going forward; increase the tax-GDP ratio promote transparency and reduce corruption because of the paper trail (necessary for claiming input tax credits) it will create an Indian common market because it will replace a number of state-levied taxes. There are estimates that implementing GST will increase growth by 2-3 percent in the medium term.
Process ahead: The constitutional amendment bill contains the key provisions. We aim to secure legislative passage within the next three weeks in the center after which it will go to the states (2/3rd of the states will need to ratify). The aim is to make the base as wide as possible. We have promised compensation for 5 years to the states (tapering in the last two) for any loss in revenue. We have a GST council in which all the states and the center are represented. Very democratic governance and voting structure. GST council will take a number of decisions relating to the revenue neutral rate. We will aim to keep the rate competitive close to international levels and minimize exemptions.
Technical preparedness: Aim to implement by April 1, 2016. The technology backbone is being put in place through GST-IN.
Tax administration
Let me emphasize that we are absolutely committed to a transparent and predictable tax regime; there will be no retrospective actions and we will see taxpayers as partners not as potential hostages or victims. These are not expressions of intent. We have translated them into action.