Finance minister Arun Jaitley on Thursday said he expects the two standard rates of GST — 12 per cent and 18 per cent — to converge into one in due course to make the indirect tax regime even more simpler. He said the GST Council decided these two standard rates keeping in mind the diversity of income levels of Indian citizens and the inflation impact of the new tax system. Overtime, the GST may considering converging the two standard rates, he said. He said the country witnessed a smooth GST roll out and collections have surpassed government’s internal target.”I do see a situation where, assuming tax compliance remaining high and the transition smooth, the GST Council, the first federal institution, which is sensitive to the challenges of time, can take the appropriate decision (on tax slabs) taking into account its impact on inflation,” he said.
Even with 64 per cent of the GST assessees remitting taxes in July and excluding those who availed of the composition scheme, the centre and the states have exceeded their combined target of tax collection, he said.
He added that the economy was passing through a challenging phase and some in the manufacturing sector may have suffered due to GST. On a query on privatisation of public banks, Jaitley that issue is “not part of the political debate” as of now and the government was focussed on resolving the stressed assets in the system and in improving the health of the public banks. Jaitley said banks are “taking the debtors to task” for the first time using the bankruptcy law. He said the defaulting borrowers should either pay their dues or let somebody else take over the companies.
After prodding from the RBI, the banks have initiated insolvency proceedings against 12 large companies accounting for almost Rs 1.8 lakh crore worth of bad loans. The RBI has prepared a second list of 40-50 such firms.
While Centre is open to providing more capital, cleaning up stressed loans was a bigger priority, Jaitley said. Stating that results of the proceedings against debtors would dictate how the banking situation improves, he said the process will take time and cannot be “a surgical solution to this.”
“A very easy solution to suggest is tax payers must pay because the private sector has defaulted,” he said, adding bank recapitalisation, where the government puts in more capital in public sector banks to shore up their books, effectively amounted to that. “Therefore, I think let’s try and make the private sector pay for their debts or allow somebody else to step in,” he said. The government, he said, has already put in Rs 70,000 crore in banks as capital over a four year period and is “open” to putting in more money. There is also a possibility of some banks raising resources from markets, he said.”We are also at an active stage going for consolidation. We don’t need so many public sector banks. We need fewer but stronger banks,” he said.
When asked about the need to for the RBI cut interest rates to stimulate the economy, Jaitley said every finance minister wants interest rates to go down. “That’s been constantly the desire of everyone. But then at the end of the day, the regime and the system we have is that the finance ministry or North Block does not have the last word in this. Therefore we will live with the regime that we have,” he said.