New Delhi: The government is working on a set of measures to remove friction points in the economy with a view to ensuring easy availability of funds to productive sectors and stimulate overall growth, sources said.
However, the strategy being worked out does not include proposal for reduction of GST rates as the government believes that taxes are already lower than in the past, they added. The set of measures being firmed up by the finance ministry is based on the feedback received by Finance Minister Nirmala Sitharaman during her interactions with different stakeholders, including industry chambers, bankers and foreign and domestic investors.
The sectoral meetings with the representatives of various sectors, including banking, MSME and auto, over the last few days have highlighted some of the pain points, sources said. "These friction points will soon be removed with a view to accelerate growth momentum," an official said, adding these would address various common concerns of the industry. The industry has pressed for steps to ensure availability of credit, lower borrowing cost and simplification of some of the policies which could spur growth.
The government has set 7 per cent growth target for the current fiscal and data points of the first quarter are in line with that direction. Despite being an election period, Goods and Services Tax (GST) collection jumped 9 per cent in the first quarter while direct taxes rose by 12.9 per cent, close to the growth in the same period last fiscal. Corporate tax collection has also remained stable during the quarter, with a growth rate of 13.3 per cent.
As far as GST revenue collection is concerned, the average mop-up has been over Rs 1 lakh crore during the quarter despite slowdown in industrial activities. GST collection soared to Rs 1.13 lakh crore in the month of April, the highest ever since the indirect tax regime was rolled out on July 1, 2017. Gross GST collections stood at Rs 1.02 lakh crore in July, marginally up from the previous month. The July 2019 mop-up was, however, 5.8 per cent higher than the Rs 96,483 crore collected in the same month last year.
Sources said there is still a lot of scope for improvement in GST collections as more than six months are left for the fiscal to end. There is going to be thrust on improvement in compliance and collection efficiency by making tax process simple and predictable. With various initiatives being undertaken by the government, it is not difficult to achieve the growth targets set in the Budget, sources said. The first quarter GST collection, although slightly subdued, is not grim at all, sources said, adding that second half of the current fiscal would compensate for some of the slowdown witnessed during the April-June period.
With regard to GST rate cut as demanded by the auto industry, sources said the government is of the view that the rate is already lower than the previous taxation regime. There is hardly any scope for further trimming of the tax rate as the government has its own revenue targets for meeting obligation for social sector needs and infrastructure development. The slowdown in auto sales is due to the industry's resistance of not launching BS VI models in a phased manner, rather than the government's policies or current GST rate, the sources added.