economy | IST

Finance secretary Ajay Bhushan Pandey on sectors driving economic recovery, next stimulus package and extension of PLI scheme

As the government prepares for the next set of stimulus measures to ensure economic recovery is on the desired track, finance secretary Ajay Bhushan Pandey spoke to Timsy Jaipuria on what the focus areas are, which sectors are pushing the recovery and whether there is a scope to rationalise GST rates in the near future.
Here are the excerpts from the interview:
Q. GST collections have crossed Rs 1.05 lakh crore for the first time in the current fiscal. What is your assessment of these numbers, do you expect the growth trend to continue?
A: This is the second straight month where we are seeing a growth in GST collections. The collections have crossed Rs 1.05 lakh crore this month. The revenues for the month are 10 percent higher than the GST revenues in the same month last year. During the month, revenues from import of goods were 9 percent higher and the revenues from the domestic transactions (including import of services) are 11 percent higher than the revenues from these sources during the same month last year.
The growth reflects a healthy sign of economic recovery. We are now seeing 29 lakh new e-way bills are getting generated in a day, it shows that manufacturing is happening and goods are moving. The growth in GST collections seen is for the business activity in September, so the festival season sales are yet to be reflected next month. We expect growth to continue.
Q. The GST compensation issue is far from being settled, opposition states still have reservations. How are you ensuring that the remaining states also come on board with the borrowing option proposed by the centre?
A: The issue has almost got settled. The borrowing option has been altered as per the states' suggestions. Till now, 22 states and 2 union territories have already availed the borrowing. When it comes to the demand of opposition states, the finance minister has written to chief ministers of those states to come on board. At the officers' level, the dialogue is still on.
We continue to remain engaged with them and will continue to convince them to avail of the option and take the money. They're always welcome to join anytime.
Department of Expenditure and Economic Affairs have ensured that a 5 percent rate of interest will be charged for borrowing. This is the lowest rate of interest so that the consumer does not have to pay for longer and the burden gets reduced.
I agree the consumer will continue to pay more cess, beyond June 2022 to meet the compensation shortfall, but that's a unanimous decision of the GST Council to meet the shortfall in the compensation fund.
Q. But, revenue augmentation is an on-going exercise, do we see some movement on rates in the near future?
A: A GOM was formed last year which had proposed to merge rates to bring revenue neutrality. If you see, as of today, according to a study done by RBI, the current GST rates are at an average of 11.5 percent and revenue neutrality is expected around 16-17 percent. It is for the council to see and decide how rates can be merged.
Another revenue augmentation measure suggested by the GOM was to correct the inverted duty structure. We saw in the last few meetings that the council in principle has agreed but decided not to take the final call due to the economic impact of the pandemic.
I, as secretary to GST Council, would like the council to consider correcting the inverted duty structure at the earliest. We have already seen that the inverted duty was corrected in mobiles and the prices have not got increased.
Q. When it comes to economic recovery, what gives you comfort, and as everyone is expecting, the government will get another stimulus package soon. What would it look like and how soon will it be rolled out? Can we expect it around Diwali?
A: We have seen signs of recovery over the last few months in various parameters including electricity consumption, purchasing managers index, goods and services tax collection, GST collection in October...
On last Friday, 29 lakh e-invoices were generated. The economy is not only reaching, it is entering into a growth territory on at least on a month-on-month basis.
Sectors such as auto, FMCG, mobile phones are showing healthy signs of economic recovery.
We need to see whether we are able to sustain these green shoots, given the play of the pandemic.
The government is constantly getting suggestions from various quarters, industry, etc., and as we have been doing, we will announce the next set of measures when the government feels it is necessary.
We are open to coming up with more stimulus measures. The government is identifying the sectors which have not got the relief and still need intervention.
Sectors such as travel, tourism, hospitality are giving us suggestions.
Various other stressed sectors are under the government's consideration.
Q. There are also talks that the government might include more PLI and PMP schemes after the initial success of PLI in pharma, medical devices, mobile & electronics as part of the next stimulus, your views?
A: We have seen a good response to the PLI scheme in pharmaceuticals, medical devices, mobile and electronics. Post that, more and more departments and ministries are requesting for PLI scheme.
PLI will not just be considered as a stimulus but is also a long-term policy reform to push manufacturing under Aatmanirbhar Bharat Abhiyan.
As far as the finance ministry is concerned, we are not considering any revenue constraints to announce PLI schemes. The sectoral departments should be ready to roll out these schemes.
Q. Health ministry has come up with an advisory that over the next few months, covid cases might increase. Is the government prepared to deal with the economic impact of this?
A: Globally, talks have started of a second wave. In April, at the onset of the pandemic, the country had initial hiccups, since the virus was new and no one knew how to deal with it. Slowly, now the country is prepared, be it health-wise, medical infrastructure. The government is ready and prepared to deal with the impact of the pandemic if the country sees a second wave.
Q. Tax collections have seen a huge impact, the direct tax collections missed the targets last year also and again this year the collections are down due to the pandemic. By how much will there be a downward revision of tax collections, that can be considered as revised estimates?
A: Recent CGA (Controller General of Accounts) numbers show a 22 percent decline in gross tax collections. This is an impact of both reduced corp tax rates and the pandemic. In certain months this fiscal, we have had much lesser revenue both in the direct tax and the indirect tax. It is now starting to show positive growth. So, I will be happy to watch for one or two more months. But if you see at a broader level, the economy will see a near-zero kind of growth.
The decline in collections is also because of the corporate tax reduction, which was announced last year on 20th September. Corporate tax collections are down by 32 percent and personal income tax is down by 15 percent.
The budget exercise has just started, so we cannot give estimates of revised tax collections as of now, we would like to watch the situation for a few more weeks. We need some more time to assess the impact on taxes. Also, how the pandemic changes its course, and other factors before taking a call on the tax estimates.
Q. How much slippage in fiscal deficit are you expecting this year?
A: That figure also - we will get to know when we actually work out a revised estimate.
Q. What should a taxpayer expect from the upcoming budget?
A: The budget exercise has just started. I have written to all states and ministries to come back with their suggestions for the upcoming budget. We are looking at all aspects. I cannot share the budget priorities now as the exercise has just started. But, let me assure you that the government will keep all aspects in mind and will continue to deliver for all the concerned areas.
Q. Vodafone tax issue has been bothering the government. What is the future course of action on it? Some experts say that the case will have an impact on the Cairn tax issue as well. How do you see this? Your comments?
A: We have received the arbitration award and we are studying it in detail. We are currently exploring all legal options. We have time till 30th November according to the legal process. We are yet to get formal legal advice. You know the talks between a client and the lawyer are secret so I cannot share the legal suggestions that have come in so far. When it comes to the impact on other cases, as I said we are looking at all aspects, including the impact on other cases. All aspects will be kept in mind before a final call is taken.
Q. There are concerns that the faceless appeals' process hasn’t begun even after a month of launch and scrutiny hasn’t begun as far as faceless assessment with time-barring date approaching?
A: In the faceless assessment about 17,000 cases have been decided as of today. In the first phase, 58,000 cases which were taken up, in about 17,000 cases final orders have been passed. I got many messages from the people who were pleasantly surprised that when their cases were taken up for scrutiny, they did not have to go and visit the income tax office or meet the officer.
They got the notice, they replied to that notice online; if any supplementary question was raised, they also replied to that. Finally, the order has been passed. As for faceless appeals, during this one month, the systems have been put in place, the officers have been posted. People have also started filing appeals as all those cases have been transferred. Once the cases have been allocated to the officers, they will issue online notices to the respective appellant or the respective parties, and then after the completion of the faceless appeal process, the necessary orders will be passed.
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