GST revamp to set off demand, investment, job cycle: FM Nirmala Sitharaman

Sitharaman says the govt will shift focus to speed up disinvestment

After delivering on reforms in goods and services tax (GST), the Union finance ministry will shift its focus to accelerating disinvestment in public-sector enterprises, enhancing their operational efficiency, and monetising the vast, underutilised assets they hold, Finance Minister Nirmala Sitharaman has told Business Standard.

 

“I need to press the pedal on disinvestment. And I will be working on it. There is no new agenda but the existing agenda that because of various different reasons sort of went in slow motion. I’ll have to see what the best way is to revive and bring them on track,” she said.

 

Sitharaman said the sweeping GST rate rationalisation last week would set off a virtuous cycle of higher consumption, investment, and job creation. 

“Everyone is going to have that relief. That itself will trigger consumption. Demand will increase … So once that investment comes, once that capacity is built and jobs are created, incomes are given to them. So this GST reform is a classic example of that virtuous cycle,” she said, adding that this move directly addressed India Inc’s concern that weak demand was holding back investment. 

Sitharaman said the government was adopting a trust-based monitoring of industry passing on rate-cut benefits to consumers. “My approach to industry or trade is with trust. And that’s why they already are giving statements because we’re talking to them to pass it (benefit) on. The intention is good. We want people to benefit. So I start with the point of trust that they will pass. So I can’t really say on September 22, I’m sitting with a stick out.” 

 

On the impact of the 50 per cent tariff imposed by the Donald Trump administration, the minister said various sectors were making their assessment of its impact and after the government received inputs, it would unveil a package for exporters. 

“Unless a particular industry tells its ministry or department concerned that this is the hit, the government cannot work out anything meaningful. That process is to find out what the hit is. After all, it started on August 27. We’ll have to get a figure and see,” she added.

 

Sitharaman said by the end of this month the rules and operational guidelines for the GST appellate tribunal would be in place and hearings would start across the country (at its various Benches) by November. 

“Every state has a minimum of one or two tribunals even now, as we begin, and the appellate authority will be in Delhi. That group of officers who are working on (issues such as) execution, jurisdiction, case value, and so on, will submit its report in another 10 days,” she added. 

Asked whether GST would have faceless assessment on the lines of income tax, Sitharaman said she would first wait for the reforms to stabilise before considering it.

 

“Then we’ll take everybody on board and decide how to do this because there is an SGST (state GST) component, a CGST (central GST) component, and an IGST (integrated GST) component. Faceless will mean in all three cases, participation of both the states and the Centre in the faceless process,” she added.

 

On the government raising GST on job work from 12 to 18 per cent, which may affect outsourced manufacturing work by small companies, particularly in the apparel sector, Sitharaman said it was based on the principle that most services were taxed at 18 per cent because the rate of 12 per cent was gone.

 

“It falls in the category of service. It is for the manufacturer to reform his business formula accordingly. Tax cannot be emotional. I have sympathy for this sector,” she added.

 

Sitharaman also ruled out relief for insurance companies for their revenue loss on account of the zero rate on insurance services for individuals.