Priority To Pass On Tax Cut Gains, Says Sitharaman

(MENAFN- Live Mint)

Finance minister Nirmala Sitharaman will personally monitor whether businesses pass on the benefit of the goods and services tax (GST) rate relief announced on Wednesday by the federal indirect tax body, the GST Council, the minister said in an interview, highlighting the importance of consumers gaining from the tax reform for it to succeed. While several companies have already pledged to transfer the benefit, Sitharaman noted that the government will remain vigilant. She also indicated that the next wave of reforms will focus on strengthening the framework of non-financial regulators such as the Competition Commission of India (CCI) and the Food Safety and Standards Authority of India (FSSAI). Transitional arrangements are being put in place to ensure the smooth rollout of the new GST rates from 22 September, the minister said. Sitharaman stressed that on account of the expected boost arising from the consumption stimulus, the Centre will, despite the GST rate cuts, maintain its budgeted fiscal deficit target of 4.4% this financial year. The minister also indicated more flexibility in investment rules for Chinese projects. Edited excerpts:

After direct and indirect tax reforms, what are the next set of reforms that the government is undertaking? The prime minister in his Independence Day promised laws and policies fit for the 21st century.

First, I have to see to it that the GST rate reduction gets transmitted to people. GST reform shows bureaucracy, whether central or state GST-related, have worked with amazing speed and delivered. It was a very rigorous and intensive exercise. It's like taking an exam, a very rigorous one. Whether it is actually reaching the people, is a different exam. I have to take that also. I will happily take that. The reform is being implemented from 22 September to ensure smooth transition.

How soon do you think increased consumption demand will offset the effect of the GST rate cut?

If the festive season is good and as in previous years, people buy their aspirational products, we should be able to make up for the tax rate reduction within this financial year itself. What we hear from the industry gives me the feeling that in all likelihood, from 22 September, people will go out there to make purchases.

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Absolutely, there's likely to be a surge, like post-covid 'revenge buying'. We will be able to meet the GST revenue growth target this year, and I am also saying we will meet fiscal deficit targets as estimated. No need for any change in expenditure plans.

What are the challenges you face in implementing the GST rate reduction?

The challenge is more in making sure that the rate cut is transmitted to the people. That is my focus. That will be my area of attention. From 22 September, I will keep a watch. Several MPs (members of Parliament) have told me that in their respective constituencies, they will keep a watch if the benefits of rate cuts are getting transferred to the consumers or not. We are already talking with the industry, including insurers. I will closely monitor it. Absolutely. If it is not being passed on to consumers, I will see what I need to do. Obviously, I'll have to check this sector-wise.

If it is not passed on, will there be action?

When I say that I will closely monitor, that is implied. But I think, to be fair to industry and trade, many of them have come voluntarily to say we will pass it on.

Given the improvement in bilateral ties with China, will there be more flexibility in cross-border investments and movement of personnel?

Already, there is some flexibility being shown in the use of Press Note 3 , particularly for projects which are already on the ground and for projects which are underway and are not able to have technicians and experts to complete the project. On that, some flexibility is already being shown. Similar things will be taken up so that India's infrastructure investments do not struggle for absence of necessary expertise.

Some research reports have suggested that GST rate cuts will raise consumption to such an extent that it will offset whatever impact the US tariffs may have on exports. Do you think that's likely to happen?

It's very difficult to assess the impact of tariffs at the moment, because it depends on different sectors and each sector's way of handling it and that sector's exposure to the US market. Not all industries are equally exposed. The more exposed sectors have to give us an estimate of the impact. Before the sectors make any assessment of what kind of impact US tariffs may have on them, it will be very difficult for us to make a conclusion, even based on the data that we have. So, we will have to wait for those industries themselves to make their assessment as some sectors are exposed more, and some others less. Only based on that, I can make an assessment.

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Since the 'China plus one' advantage that India had in terms of scaling up presence in global supply chain has been affected by the US tariffs, how should we rework our economic strategy?

I have said different industries have to make an assessment of their exposure to the US market and to what extent they may get impacted. These are still being calculated. I cannot, just because the announcement has been made on tariff, announce a changed economic strategy, till such a time I understand the precise impact.

What is the next big reform in your ministry?

I think the next reforms are about non-financial regulators. That is a pending reform for a very long time, and some work is going on. I had announced this in the Budget.

Could you name a few non-financial regulators identified for further reforms?

Competition Commission of India and Food Safety and Standards Authority of India.

What is the roadmap for disinvestment?

We will go on with it. That's the way ahead.

About India needing to have at least four to five SBI-size banks-is there a time frame for this?

These are not things on which I can give a time frame, expecting others to fall in line. They have to have the ecosystem building up. We will need policy support. We will have to work on a lot of things.

There was a plan for privatizing one general insurance company. Is that plan still under consideration?

Nothing is off the table.

If states come to you as part of the budget-making exercise for financial support because of the GST rate cut impact , will that be looked into?

I consult states every year before the budget anyway. We hear their submissions and we do respond.

Are you planning any support measures for exporters?

Yes, something is being worked out among different departments. We will have to see what form it takes.

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