According to MoF, economic recovery may further strengthen in current H2 of 2021-22 owing to positive market sentiment, exports, vaccination drive, capex expenditure etc. The current mood is backed by governmental policies as well as Reserve Bank’s actions. Still, however, risking inflation, interest rate reversal, commodity prices, rupee weakening, slower consumer demand etc are some causes to worry about. Omicron may not be that deadly as large scale vaccination may offer required protection. Initial indications are that it may not have severe impact.
The latest monetary policy of RBI announced on 7th December, 2021 is on a positive note wherein RBI has decided to continue with the accommodative stance as expected, with no change in repo and reverse repo rates. Despite Omicron threat and other risk factors evolving globally…there is no change in the growth and inflation projections of the RBI for the current fiscal despite changes in the macroeconomic scenario. That is indeed a positive sign.
According to latest RBI report also, the Indian economy continues to forge ahead and actually emerging out of the shackles of Covid pandemic. Going forward, the emergence of the Omicron strain has heightened the uncertainty in the global macroeconomic environment, accelerating risks to global trade with resumption of travel restrictions/quarantine rules at major ports and airports. On the other hand, former Chief Economic advisor, Mr. Arvind Subramanian has opined that it is too early to celebrate India’s economic recovery.
Activities in various segments of economy have crossed pre-pandemic levels, but in certain key segments like private investment, private consumption and a few other sectors, which are very critical for growth of GDP, it is still lagging behind from pre-pandemic levels. The economy is facing several headwinds, emanating from mostly international market factors in terms of financial market volatility, volatility in crude prices, supply side bottlenecks like container shortages and shipping charges and shortages of key inputs like semi-conductors.
It has projected a GDP growth of 9.5% for financial year 2022. RBI has focused on sustaining economic revival in the back drop of inflation.
Fitch has cut India’s GDP growth forecast for financial year 2022 to 8.4% from 8.7%. GDP growth momentum has been predicted to peak in financial year 2023 at 10.3% led by consumer demand and easing out of supply disruptions.
According to latest IIP data, industrial production growth has slowed down to 3.2% in October, 2021, lowest in last 8 months. However, mining sector grew @ 11.4% in October compared to 8.6% in September. Manufacturing grew by 2% only against 3% in September, 2021.
The countdown to Union Budget 2023 has begun. Prime Minister and Finance Minister, both are meeting various stakeholders across sectors like banking, healthcare, telecom, venture capital, CEOs from all across etc. Industry has demanded to maintain tax stability and continued thrust on growth and reforms. Financial sector has demanded for centralized registration on pan India basis for GST. The Budget is to be presented on February 1, 2022 for the Financial Year 2022-23.
The next meeting of GST Council is expected to take place in new year only in January, 2022. While it may deliberate on rationalization of GST rates and inverted duty structure, it may also have pre-budget discussions leading to recommendations related to GST.
GST collections have shown a steady growth over time, even after Covid. In most of the cases, month-wise GST collection in 2021 has been higher than that of 2019.
On GST compensation to states / UTs, a sum of over Rs. 37000 crores is yet to be paid for financial year 2021. It is fact that economic impact of Covid has resulted in higher compensation to states / UTs due to lower GST and Cess collection.
The economic impact of the pandemic has led to higher compensation requirement due to lower GST collection and at the same time lower collection of GST compensation cess. GST compensation of Rs. 1,30,464 crore has been released to all States/ UTs to partly meet the compensation payable for the period April, 2020 to March, 2021 as the amount in GST Compensation Fund was not adequate to meet the full compensation requirement. This issue of shortfall in release in GST compensation was deliberated in 41st & 42nd GST Council meetings and accordingly, Centre had borrowed loan of Rs. 1.1 lakh crore from open market and passed on as back-to-back loan to States/UTs to meet their resource gap due to short release of GST Compensation for FY 2020-21.
CBIC has extended the term of National Anti-profiteering Authority by one more year till November, 2022, i.e. a total of five years so far. It also notified few changes in form GST DRC-03 vide Notification No. 37/2021-Central Tax dated 01.12.2021.
The GST shall be levied on restaurant services provided through e-commerce operators we.f. new year i.e., 01.01.2022. CBIC has clarified various issued on taxability TCS, returns, registration etc vide Circular No. 167 dated 17.12.2021. Various provisions of Finance Act, 2021 have been notified to be effective from 01.01.2022 vide Notification Nos. 38 and 39/2021-Central Tax dated 21.12.2021.
It is high time that Tribunals in GST law should commence functioning, as soon as possible. This will fast track the litigation disposes and reduce burden on Courts.
2021 is about to end in a few days from now. Like 2020, the current year 2021 has also been Covid impacted and we move to 2022 in similar fears of yet another variant of Covid – Omicron.
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