 "Q1 GDP decline temporary, economy will bounce back: Ravi Shankar Prasad")
Since the macro fundamentals of the economy are very strong, growth will definitely recover going forward, Prasad who heads the IT and law and justice ministries, said here.
"The GDP grew 7.5 per cent in 2014-15, 8 per cent in 2015-16 and 7.1 per cent in 2016-17. Only in one quarter, that is the first quarter of the current fiscal, GDP growth was at 5.7 per cent. I believe it will bounce back in the second quarter," Prasad said.
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Attributing the lower growth rates to the shake-up of the economy arising from GST rollout, he said, "when we build a bridge, we need to divert traffic, which leads to long queues of vehicles. But that is temporary, as things get normalised once the bridge is opened."
"Just like that, the GST is a new regime which led to a shake-up. But, since the fundamentals of our economy are strong, we will definitely recover," he added.
Asked about the timing of the tax cuts announced by the the GST Council last evening, which mostly benefit the poll-bound Gujarat, Prasad said government has always been open to such changes in GST rates as it is not an "authoritarian government".
"This is a massive tax reform implemented in such a large country. So, if there is need for changes, why not. The (Narendra) Modi government is not an authoritarian government. We are a pro-people government which listens to the people's problems," he said.
Buckling under pressure, just three months after the rollout, the GST Council last evening made sweeping changes to give relief to small and medium businesses on filing and payment of taxes, eased rules for exporters and cut tax rates on as many as 27 items.
Businesses with annual turnover of up to Rs 1.5 crore, which constitute 90 per cent of the taxpayer base but pay only 5-6 per cent of total tax, have been allowed to file quarterly income returns and pay tax instead of the current provision of monthly filings.
Also, the turnover threshold for businesses to avail of the composition scheme that allows them to pay 1-5 per cent tax without going through tedious formalities, was raised to Rs 1 crore from current Rs 75 lakh.
"The GST Council has considered the implementation experience of the last three months and gave relief to small traders... Compliance burden of medium and small taxpayers in GST has been reduced," Finance Minister Arun Jaitley told reporters after the 22nd meeting of the Council last evening.
The Council also cut tax rates on 27 common use items. Tax on unbranded namkeen, unbranded ayurvedic medicines, sliced dried mango and khakra has been cut to 5 per cent from 12 per cent while the same on man-made yarn is reduced from 18 per cent to 12 per cent.