GDP growth to be 7% plus in 2017-18, says Economic Affairs
Need to raise Personal Income Tax-GDP ratio : Revenue Secretary
Budget is Progressive, Pragmatic and People-oriented: Finance
NEW DELHI, 4 February 2017: The 2017-18 Union Budget charts a story that is consistent with the policies of Government in the last couple of years, is predictable in its approach and is shorn of unnecessary surprises for the industry and society, said Mr. Ashok Lavasa, Finance and Expenditure Secretary, Ministry of Finance, while addressing the National Executive Committee Meeting of the Federation of Indian Chambers of Commerce and Industry (FICCI), here today.
Mr. Lavasa’s observations were corroborated by Mr. Shaktikanta Das, Secretary, Department of Economic Affairs, Ministry of Finance, who said that the Budget maintains the Government’s commitment with regard to reforms and taxation policy.
The Finance Secretary said that the Budget demonstrates that governance reforms were fundamental to transforming the economy and energising the people. Cleaning the system was another key component of the Finance Minister’s proposals which is attempted through a series of steps such as Aadhar linked devolution of government support and subsidies to the targeted beneficiaries, expenditure reforms and the proposed revamping of the General Financial Rules to monitor how the various departments were expending the allocated funds.
Mr. Lavasa said that governance was being made more transparent and efficient through measures such as government procurement through the e-marketplace, rationalisation of Central sector schemes and reduction in Centrally-sponsored schemes.
He said that technology was being increasingly employed to impart efficiency in expending fund and space technology was being deployed to geo-map the creation of assets on the ground. This, he said, would help in framing an outcome budget. Once, every two years of the duration of a government scheme, an evaluation would be done on the way funds were being spent.
Mr. Lavasa described the Budget as progressive without being high sounding; pragmatic without being conservative and people-oriented without being populist.
Mr. Shaktikanta Das maintained the impact on demonetization on growth would be very transient and that it would not spill over to the next year which would see a growth of 7% plus and the economy would continue to do well thereafter. In spite of the stronger global headwinds, India remained buoyant, he emphasized.
In his elucidation on the Budget proposals, Mr. Das said that the Government had stuck to its commitment with a progressive outlook. This is seen by avoidance of retrospectivity in taxation, targeting of government support through Aadhar, reforms in agriculture, especially the model law on contract framing, UGC reforms, proposed amendments to the Airports Authority Act, metro development to harness private investment and skills and integration of spot and derivative markets to provide remunerative prices to farmers.
Mr. Hasmukh Adhia, Secretary, Department of Revenue, Ministry of Finance, said that the most challenging task for the government is to increase the share of personal income tax in GDP, which at present was abysmally low. He said that personal income tax has a share of a mere two per cent, which needs to be raised substantially. Also, the profile of personal income tax does not match with the consumption profile of the country, which needs to be looked at.
Speaking on the issue of India’s corporate income tax not being globally competitive, Mr. Adhia said that the government had limited resources and therefore moderation in corporate income tax rate has to be seen in the context of a concomitant expansion of the tax net. On GST, he said that it was well on track with the Centre and State Governments on board and it is hoped that on July 1, 2017, GST will become a reality.
Mr. Sushil Chandra, Chairman, Central Board of Direct Taxes, Ministry of Finance, and Mr. S Ramesh, Member, Central Excise, Service Tax & IT, Ministry of Finance, explained and clarified the provisions of the Finance Act and reiterated that the government was simplifying the tax regime to the extent possible for industry and individual taxpayers. The government was employing technology to make tax assessment faceless.
Earlier, Mr. Dinesh Kanabar, Chair, FICCI Committee on Taxation & CEO, Dhruva Advisors LLP, gave snapshots of the plusses and minuses of the Budget proposals with regard to direct taxation and Mr. Mahesh Jaising, Partner, BMR Advisors LLP, made a presentation on the indirect tax proposals.
According to a FICCI analysis on Economics of Union Budget 2017-18, the budget would strengthen the economic muscle of the country. It is directionally correct, fiscally prudent and strengthens the governance fabric of the nation. There is a balancing of objectives of higher economic growth and improved economic justice.
However, implementation is the key, especially with respect to capital expenditure, dsinvestment, tax reforms and Ease of Doing Business. Additionally, FICCI looks forward to additional measures over the year with regard to corporate tax reduction for large companies, and a further capital infusion in PSBs and introduction of Public Sector Asset Rehabilitation Agency (PARA).