As an important legislation like Constitution Amendment (122nd) Bill for goods and services tax (GST), apart from the land acquisition Bill and others, gets drowned in the parliament’s monsoon session pandemonium, the Indian industry and economists are keeping a hawkish eye on every development to gauge the direction of the economic winds.
For them, the GST Bill is very crucial as it would have a major impact on their business by improving inter-state movement of goods and material with simplified tax regime and making them more cost competitive.
All the brouhaha in the parliament gives an impression that the legislation, which is already delayed by a session when it could not be passed in the Budget session, could get pushed to the winter session.
Rana Kapoor, founder, managing director and CEO of YES Bank and president of Assocham, believes the National Democratic Alliance (NDA) government must prioritise the GST bill in the current monsoon parliament session as many economic goals were dependent on it.
“The Asian Development Bank (ADB) has retained its India economic growth forecast for 2015-16 at 7.8% in its flagship publication ‘Asian Development Outlook’ (ADO) based on its expectation of concrete progress on reforms among other criteria and has cautioned that risks to growth prospects could emerge from further delays in passing crucial legislative bills,” warned Kapoor.
He said if the NDA government was successful in passing the many proposed legislations to be tabled in the monsoon session, it would reflect positively on it.
Shujaul Rehman, president and chief operating officer, Garware Wall Ropes Ltd, also feels that even while other Bills were important, the GST Bill had to be given priority to get the economic growth rolling in the right direction.
“It will benefit us in a big way and we want it as soon as possible. It should come in the form it had been visualised in the beginning – uniform tax – and should not be diluted,” he said.
The GST, which will merge all indirect taxes into a single levy, has been tweaked a bit to address the grievance of manufacturing states that were losing out revenue. The two major changes are 1% additional or origin tax that could be charged by producing states and 100% compensation to states losing revenues due to imposition of GST for all five years.
Kapoor said Assocham estimated that a comprehensive rollout of GST could improve exports by 3-6% and contribute to 1-1.5% growth in GDP to create enhanced employment opportunities.
“The implementation of GST would lead to a simplified tax regime and easier compliance norms. This is projected to increase GDP annually 0.9-1.7% with an accompanying increase in tax revenues of around 0.2% of GDP. A 20% reduction in logistics costs of non-bulk goods is expected due to a rationalised tax regime. This would make domestic production of goods and services more cost effective with ensuing 3.2-6.3% annual gains in exports,” said the New Delhi-based banker.
Ranen Banerjee, leader, public finance, PricewaterhouseCoopers India, said there was no downside risk from GST bill getting delayed but it could result in expected upside not getting realised.
“Obviously, this could affect business sentiments a bit in the long run. Its impact on market sentiment would be only for the short term,” he said.
Banerjee, however, was optimistic of the Bill seeing the light of the day as he said the government may surprise everyone by getting the required support for it.
“You never know, the government may surprise us. Let’s see how it plays out in the next few days,” he said.
T V Mohandas Pai, chairman of Manipal Global Education and former Infosys CFO, said GST Bill had moved some distance under the current government with it being passed in the Lok Sabha in the Budget session and the Parliamentary Standing Committee submitting its report to the house.
He said the preparation for rollout had already begun but if the Bill gets stuck in the Rajya Sabha or the state assemblies it could be a problem. The Bill needs to be ratified by 50% of the state assemblies. The deadline for the rollout of GST is April 1, 2016.
Source : http://www.dnaindia.com