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Jaitley says implementing GST can significantly improve growth

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NEW DELHI – Finance Minister Arun Jaitley today said the implementation of the Goods and Services Tax has the potential to “significantly improve” India’s economic growth.

Addressing the finance ministers of states at the pre Budget consultation meeting, Jaitley also emphasised that the new indirect tax regime needs to be  implemented soon.

“I have been informed that on many issues convergence of views has happened and there are some vexatious issues wh ch only need resolution. I wish and hope that these will be sorted out sooner than later,” he said.


The empowered group of state finance ministers was formed in 2007-08 to build consensus among the states on various issues related to the tax code.

However, issues like inclusion of petroleum products in GST and revenue loss of states after GST is implemented have resulted in delays.

At the meeting with the union finance minister, Assam Chief Minister Tarun Gogoi supported introduction of GST, but said petroleum products should be kept out of its purview.

He said in order to allay apprehensions of the states about future revenue loss on account of introduction of GST, there should be a “Constitutionally mandate compensation mechanism.”

Also, Haryana Finance Minister Harmohinder Singh Chattha asked the union government to pay states revenue loss on account of reduction in Central Sales Tax from 4% to 2%.

Bihar Finance Minister Bijendra Prasad Yadav also demanded income tax and excise rebate for industries in the backward districts of the country.

Meanwhile, the union finance minister also said low tax collection is not in the interest of the country.

“Tax collections are only at 10.0% of the GDP compared to the initial budget estimates of 10.9%. India can ill afford this trend…,” Jaitley said.

Despite steep cuts in the budgeted target for indirect tax collections, the mop-up for the year ended Mar 31 was short of the revised target by 170 bln rupees.

Jaitley also asked the states to adhere to the fiscal targets set by the Fiscal Responsibility and Budget Management Act.

“I urge the States to be fiscally responsible…I appreciate the fact that most of States have been conforming to the FRBM targets. We must carry this forward,” he said.

The Fiscal Responsibility and Budget Management rules impose limits on fiscal and revenue deficits, making it mandatory for the government to take tough measures and adhere to the set targets.

The amendment to the Fiscal Responsibility and Budget Management Act postponed the deadline for reduction of the government’s fiscal deficit target to 3% of GDP by 2016-17 (Apr-Mar) with an annual reduction target of 0.5% of the GDP every year.