Once-a-year tweak in GST rates on the cards, says FM Nirmala Sitharaman

Sitharaman says changing the rates periodically creates a ripple effect

The government is examining a proposal to consider tweaks in GST (goods and services tax) rates only once a year against the present trend of periodic changes. Speaking at a press meet in Kolkata on Sunday, Union Finance Minister Nirmala Sitharaman said: “Periodically changing rates brings uncertainty and creates a ripple effect on businesses because they cannot ascertain how much to keep aside for the year. The government also does not know how much revenue would come in. So we, not formally, propose to the GST Council to consider a situation where rate rationalisation can be done only once a year.”

“We are repeatedly telling industry … whenever they approach us for rate reduction … they should also convey the same concern to the states, and the state minister should also voice the same concern in GST Council meetings. It is a federal structure, where there is a healthy relationship between the Centre and the states,” she said.

Grandfathering option to taxpayers

Sitharaman gave a hint that for those who had made long-term investment, keeping in mind the previous tax regime, there could be some grandfathering option for them.

“Whenever government policies are made … there is a whole lot of grandfathering processes which we settle. I don’t think that we have been indifferent to that or overlooking that,” Sitharaman said. Also, with the twin-tax system, taxpayers have wider investment options, including stocks and debt instruments, where returns are equal or more that those in traditional savings, she said.

“Those who feel they can save with exemptions can continue to be in the old system. Those who feel they can make considered decisions about the money which is now available in their hands have the choice as to where they want to put their income. Savings need not be necessarily in fixed deposits or post office schemes. They can go to shares or debt, on which returns are equal or higher,” said Sitharaman.

Rs 4 trillion retail credit during festive season

On lacklustre credit growth, Sitharaman said that the finance ministry was “closely monitoring” credit growth, particularly in the retail sector.

“Lending, particularly lending for retail by banks, is an issue we are monitoring. The finance secretary has been continuously engaging with banks,” the finance minister said.

According to Sitharaman, the government’s push for credit growth through credit camps in the last festive season led to disbursements of retail advances worth Rs 4 trillion in 400 districts.

“After that we have been following it up ... non-banking financial companies are being given facilities so that they can have greater liquidity … So all steps are being taken so that liquidity is not an issue,” she pointed out. 

Earlier, some industrialists expressed concern over the impact of TCS (tax collected at source) on Indian exports and issues like employee stock option plans.