Govt likely to announce steps to remove friction points in economy to boost growth
The government is working on a set of steps to eradicate economic pain points to ensure that funds are easily available to successful sectors and boost overall growth, sources said.
Nevertheless, the plan being developed does not include a proposal to reduce GST rates because, they said, the government believes taxes are already lower than in the past.
The series of measures signed by the Ministry of Finance is based on the feedback given by Finance Minister Nirmala Sitharaman during her interactions with various stakeholders, including chambers of industry, bankers, foreign and domestic investors.
Sector meetings with representatives from various sectors, including banking, MSME and automotive, have highlighted some of the pain points over the past few days, sources said.
“In order to accelerate the momentum of growth, these friction points will be removed early,” an official said, adding these would address various common industry concerns.
The industry has urged steps to ensure availability of credit, lower borrowing costs, and simplify some policies that could boost growth. For the current fiscal and data points of the first quarter, the government has set a growth target of 7 percent in line with that trend.
Notwithstanding being an election period, Goods and Services Tax (GST) collection jumped by 9% in the first quarter, while direct taxes rose by 12.9%, compared to last fiscal growth in the same period.
Corporate tax collection also remained stable during the period, with a growth rate of 13.3%.
Despite the decline in industrial activity, the overall mop-up was over Rs 1 lakh crore over the period in terms of GST revenue collection. The GST revenue soared in the month of April to Rs 1.13 lakh crore, the highest since the launch of the indirect tax regime on July 1, 2017.
Gross GST receipts at Rs 1.02 lakh crore in July were marginally higher than the previous month. The July 2019 mop-up, however, was 5.8 percent higher than the Rs 96,483 crore of last year.
Sources said there is still plenty of room for improvement in the collections of GST as there are more than six months left to end the bill.
Improving the efficiency of regulation and collection will be driven by transparent and consistent tax processes.
More than 5 percent increase in last year’s July GST collection with different government programs being followed, it is not difficult to achieve the growth targets set in the budget, sources said.
The first quarter collection of GST, although slightly subdued, is not bleak at all, sourcessaid, adding that some of the slowdown observed during the April-June period will compensate for the second half of the current levy.
About the GST rate reduction that the automotive industry has demanded, sources said the government believes the rate is already lower than the previous tax regime.
There is hardly any room for further tax rate cuts since the government has its own income goals to meet the requirements of the social sector and the commitments to build infrastructure.
The slowdown in auto sales is due to the resistance of the industry not to phasing out BS VI models, rather than government policies or current GST rates, the sources added.