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Can’t tax milk, Mercedes equally: PM Modi rebuts Congress’ one GSTslab demand

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New Delhi:On the first anniversary of the Goods and Services Tax (GST), Prime Minister Narendra Modi ruled out a single tax rate under the tax regime saying Mercedes car and milk cannot be taxed at the same rate but conceded that the GST is an evolving system.
In an interview to ‘Swarajya’ magazine he said that accepting the Congress party’ demand for a uniform 18% rate would lead to a spike in food and essential items’ taxation.
“It would have been very simple to have just one slab but it would have meant we could not have food items at zero percent tax rate. Can we have milk and Mercedes at the same rate?
“So, when our friends in Congress say that they will have just one GST rate, they are effectively saying they will tax food items and commodities, which are currently at zero or 5%, at 18%,” he told the magazine.
Modi who once opposed the GST as the Gujarat chief minister before turning into an ardent advocate of the new tax regime after becoming the Prime Minister in 2014, totted out statistics in support of it.
He said the GST has led to over 70%jump in indirect taxpayer base, demolished check-posts and merged 17 taxes and 23 cesses into one single tax within one year of its launch.
GST, which subsumed central levies like excise duty and service tax and state taxes like VAT, is aimed at making indirect taxation “simple” while eliminating inspector raj, he said. The new tax is an evolving system which is calibrated based on feedback from state governments, trades and other stakeholders.
Modi said against a total of 66 lakh indirect taxpayers registered since independence, 48 lakh new enterprises have registered since the launch of the GST on July 1, 2017.
“Around 350 crore invoices were processed and 11 crore returns were filed. Would we be looking at such numbers, if GST were indeed very complex?” he asked. “Check-posts across the country have been abolished and there are no more queues at state borders. Not only are truck drivers saving precious time but also the logistics sector is getting a boost and thereby increasing the productivity of our country. Would this be happening if GST was complex?”
Modi brushed aside criticism of the GST’s implementation, saying the new tax regime was a massive change, requiring a complete reset of one of the world’s largest economic systems.
“The reform merged 17 taxes, 23 cesses into one single tax. When it was finally introduced, it was our endeavour to make it simple and ensure sensitivity of the system. There are often teething troubles seen when a reform of this magnitude is carried out, but these issues were not only identified but also addressed in real time,” he said.
The GST, he said, has seen Indian cooperative federalism at its best. “We consolidated the states and developed proactively a consensus, where earlier governments had failed.”
The Prime Minister said earlier many taxes were hidden and under the GST, “what you see is what you pay.”
“The government has reduced taxes on nearly 400 groups of items. Around 150 groups of items have zero percent tax rate. If you look at the rates, for most of the day-to-day commodities, the rate has actually come down. Be it rice, wheat, sugar, spices, etc, total tax levied has been reduced in most cases. Large number of items of daily usage are either exempted or in 5% slab. Some 95% items fall in/below the 18% slab,” he said.
The Prime Minister’s comments are in sharp contrast with those of West Bengal’s finance minister Dr Amit Mitra who headed key committees on the tax regime. On the eve of the first anniversary of the GST, Dr Mitra told NDTV that the new tax had not performed up to expectations because the Centre did not carry out a pilot project to test the water and that it played only optics last July to push through the tax regime.


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Cabinet clears setting up of centralised GST appellate authority

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New Delhi: The Union Cabinet on Wednesday approved setting up of a centralised Appellate Authority for Advance Ruling (AAAR) under the goods and services tax that would decide on cases where there are divergent orders at the state level.

The setting up of a centralised AAAR would require amendments to the GST Acts. The centralised authority as an appellate body will only take up cases wherein the Authority for Advance Ruling (AAR) of two states have passed divergent orders.

The Goods and Services Tax (GST) Council, headed by Finance Minister Arun Jaitley, and comprising state counterparts, in December decided to establish the centralised AAAR.

 

“The Cabinet has cleared the GST appellate authority,” a source said after the meeting of the Cabinet headed by Prime Minister Narendra Modi.

In view of the confusion created by contradictory rulings given by different AARs on the same or similar issues, the industry had been demanding a centralised appellate authority that could reconcile the contradictory verdicts of different AARs.

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Urbanisation to be big driver of Indian economic growth: Kant

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Davos: Urbanisation will be a big driver of economic growth in India going forward, supported by favourable macroeconomic factors, accelerated infrastructure building and continuing reforms, NITI Aayog CEO Amitabh Kant said.

Speaking here at an event on sidelines of the World Economic Forum Annual Meeting, he also said the Indian economy may even exceed the IMF growth forecast of 7.5 per cent for the country.

Kant said IMF has forecast 7.5 per cent growth for India despite a gloomy outlook for the global economy and this itself is good, though there are expectations that this estimate would be surpassed. He said India is giving a big push to urbanisation with more than 100 smart cities being developed.

 

The country is also using technology in a big way to change the way business and governance is done, he added. Besides a massive infrastructure building is happening, bank credit flow has rebounded and macroeconomic factors like inflation and fiscal deficit are also being supportive, Kant said.

DIPP Secretary Ramesh Abhishek noted that states are competing with each other to attract investments and all political parties have adopted the economic reform process. He listed various reform initiatives undertaken in India, including on areas like ease of doing business, FDI, manufacturing and taxation.

They were speaking at Institutional investors’ breakfast roundtable, organised by the industry chamber CII and Kotak Mahindra Bank. Other participants included CII Director General Chandrajit Banerjee and leaders from Indian and foreign companies.

On questions about some persisting issues in doing business including on tax and insolvency related issues, Abhishek said a lot of efforts have been put in to remove all bottlenecks and starting a business doesn’t take more than a day. Besides, special provisions have been made for startups and angel investors, he added.

Kant said efforts are also being made to remove all physical intervention and digitise the entire process of inter-ministerial and inter-department consultations to fast-track the decisions.

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India will surpass China, says Raghuram Rajan

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Davos: India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries, former RBI Governor Raghuram Rajan said.

Addressing a session on Strategic Outlook for South Asia, Dr Rajan said that the Indian economy would continue to grow while growth rate is slowing down in China.

“Historically, India had a bigger role in the region but China has now grown much bigger than India and has presented itself as a counter-balance to India in the region,” Dr Rajan said at the WEF Annual Meeting 2019.

 

“India will become bigger than China eventually as China would slow down and India would continue to grow. So India will be in a better position to create the infrastructure in the region which China is promising today. But this competition is good for the region and it will benefit for sure,” he said.

The comments assume significance with China working on a lot of infrastructure projects across the region. In 2017, India became the sixth largest economy with a GDP of $2.59 trillion while China was the second large with a GDP of $12.23 trillion.

At the same session, Nepal PM K.P. Sharma Oli cited collaboration with China as well as India as reasons for the economic growth.

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