Real estate under GST will benefit people and help check black money: Arun Jaitley
BOSTON, Oct 11:
The issue of bringing real estate under the GST's ambit will be discussed next month, Finance Minister Arun Jaitley said today, as he acknowledged that it is the one sector where maximum amount of tax evasion and cash generation takes place.
The matter will be discussed in the next meeting of the GST Council to be held on November 9 in Guwahati, Jaitley said while delivering the Annual Mahindra Lecture on India's tax reforms at the prestigious Harvard University.
"The one sector in India where maximum amount of tax evasion and cash generation takes place and which is still outside the GST is real estate. Some of the states have been pressing for it. I personally believe that there is a strong case to bring real estate into the GST," Jaitley said.
The Goods and Services Tax (GST) was implemented from July 1 this year. It brings the economy under a uniform tax regime.
"In the next meeting itself, we are addressing one of the problem areas or at least (having) discussion (on) it. Some states want, some do not. There are two views. Therefore, by discussion, we would try to reach one view," he said.
The move would benefit the consumers who will only have to pay one "final tax" on the whole product, Jaitley said.
"As a result, the final tax paid on the whole product in the GST would almost be negligible," the minister said.
Jaitley said the reduction in eventual expenditure coupled with incentivising people to enter the tax net may also help reduce the size of "shadow economy".
A 12 per cent GST is levied on construction of a complex, building, civil structure or intended for sale to a buyer, wholly or partly. However, land and other immovable property have been exempted from the GST.
On demonetisation, Jaitley said it was a "fundamental reform" which was necessary to transform India into a more tax-compliant society.
"If you see the long-term impact of it, demonetisation brought in more digitised transactions; it brought the issue to the centerstage. It expanded the individual tax base. It compressed the cash currency by three per cent which was operating in the market.
"Those objectives are for the long-term. No doubt there are short-term challenges, but (necessary) for transforming India from a non-compliant to a more compliant society," he said.
The finance minister said India had historically been one of the least efficient tax system in the world with an extremely small tax base.
"Frankly, over the last several decades, serious efforts, real efforts to expand this base had not been made. You had marginal efforts," he said, adding that systematic efforts to challenge the "shadow economy" were made only recently.
"In the last few years, the bulk of the increase in tax payers has not been in terms of number of companies but individuals who are coming into the tax net," he said.
Jaitley said some people had "misunderstood" the objective of demonetisation "which wasn't to confiscate somebody's currency".
"Obviously if somebody has currency and deposits in the bank, it does not become lawful holding. They still have to account for it. Therefore, the anonymity which was attached to a cash currency came to an end and that holding got identified.
"The government was able to trace out about 1.8 million people whose deposits are disproportionate to their normal incomes. And they are all answerable to the law and pay their taxes," he said.
On the banks' non-performing assets, he said the government is working on a plan to rebuild the capacity of India's banking sector so as to support growth and reform the banking system.
"Today, with global growth turning around, we are working to put up an actual plan in play to deal with the banking situation, which is top of our agenda. We need to rebuild the capacity (of the banking sector)," Jaitley added.
"I inherited a banking system whose monies were lying in non-performing assets...are unable to service the debt. We are faced with a catch-22 situation as to how do we improve the capacity of the banks so that they can support growth," he said.
So, all these factors together adversely impacted the private sector, the minister said.
Gross non-performing assets (NPA) of the public sector banks rose to Rs. 6.41 lakh crore at the end of March 2017 as against Rs. 5.02 lakh crore a year ago, according to Finance Ministry data.
Jaitley, however, also noted that bigger enterprises did not suffer, because they approached the bond market and foreign funding which were available at much cheaper rates. They did not have to go to the Indian banks.
It is small and medium-sized enterprises that need the support of the banking system, Jaitley said, noting that SMEs are huge job creators.
India's transition to GST fairly smooth: Arun Jaitley
NEW YORK, Oct 9: India's transition to the Goods and Services Tax regime has been "fairly smooth" despite attempts by "ill-informed" Opposition leaders to derail its implementation, according to Arun Jaitley, India's Finance Minister.
Speaking at an event orgainsed here by the Confederation of Indian Industry in association with the US Chambers of Commerce, Finance Minister Arun Jaitley said under the GST the government has unveiled attractive schemes to ensure that the non-compliant in India become compliant. The event was titled "India's market Reforms: The Way Forward"
"Many attempts have been made by political groups to derail the GST, but I am glad that their own state governments are not listening to them because they know 80 per cent of the money is going to come to them so they don't have to appease an ill-informed central leader of the party and let the revenues of their own state suffer," he said. "So, the state governments are being wiser," he added.
The obvious problem in the GST, he said, is going to be that the noncompliant are going to eventually come in to the net.
"And therefore there are going to be different complaints -- some legitimate some manufactured thrown up by the non- complaint how GST is creating a problem for them," he said, adding that the government needs to have capacity to distinguish between a genuine and a manufactured complaint.
The GST Council, according to Jaitley, is India's first genuine federal institution, which meets every month, reviews the monthly situation, takes the decisions, reviews the rates and changes of rates which will take place in the times to come itself.
"It's been a fairly smooth transition," he said.
"So the lowest slab in India is five per cent, which doesn't exist anywhere in the world. That is because of the non-compliant tax character of the Indian society. You make it easy for people to enter the taxation system that you are able to expand. In the GST, for up to 10 million turnover we now have a scheme for them," he said.
"We are trying to bring them into the tax net because the first two months data has shown that Over 40% business entities make zero GST payment. Therefore, it's very top heavy in terms of payment. And there's a need to continue to expand the tax base at the bottom itself," he said.
Earlier, Jaitley responded to a question on the biggest challenges for the GST during a conversation with Dan Schulman, president and CEO of Paypal and Chandrajit Banerjee of the CII.
At the event, Jaitley said global integration of the Indian economy is happening at a time when other economies are becoming more protectionist.
Asserting that India is now a better place to do business with because of the series of steps being taken by the government in the last three years, Jaitley said procedures have been simplified.
Now as much as 95 per cent of the investments are through automatic route, and foreign investment promotion board has been abolished, he noted.
Today, 99 per cent of tax queries are addressed online, he said.
Now states are being ranked on ease of doing business, he said.
India is now capable of taking big decisions and implementing them at a large-scale, Jaitley said.
As many as 250 highways projects are under construction. India is now having surplus power and the capacity of Indian ports have been expanded, he said.
Responding to a question on digital payments, he said the younger generation is taking on to modern payment methods in a big way.
Further, all government benefits are linked directly to bank accounts. The government has introduced low cost insurance policies to incentivise the bank holders, he said.
Jaitley also addressed American investors on recent economic reform initiatives.
The finance minister is here in US to attend the annual meeting of the International Monetary Fund and the World Bank.
But before arriving in Washington DC for the annual IMF and World Bank meetings, he would travel to Boston to address the students of the Harvard University and interact with the US business community in Boston on Wednesday.
During his three day stay at Washington, the finance minister will hold a bilateral meeting with US Commerce Secretary Wilbur Ross.
He will also participate in an interactive seminar organised by the FICCI on -- "India Opportunity Conference" and attend the G-20 Finance Ministers and Central Bank Governors' Working Dinner on October 12.
Modi targets more energy reforms after meeting oil chiefs
NEW DELHI, Oct 9: Prime Minister Narendra Modi sees scope for further reform of the country's energy sector and has received "focused suggestions" from some of the world's leading energy companies, according to Indian PM's office.
Under Narendra Modi, the world's third-biggest oil consumer is trying to use its market size to strike better deals with oil exporters and attract investment into India's exploration and refining industries.
Executives from companies including Rosneft, BP, Exxon Mobil, Reliance Industries, Saudi Aramco, Royal Dutch Shell, Vedanta, Schlumberger and Halliburton met Modi as the industry gathered in New Delhi for the three-day India Energy Forum, which finishes on Tuesday.
"Participants appreciated the pace and drive with which Prime Minister Modi has brought about reform in the energy sector," PMO said in a statement after the meeting.
"Subjects such as the need for a unified energy policy, contract frameworks and arrangements, requirement of seismic data sets, encouragement for biofuels, improving gas supply, setting up of a gas hub and regulatory issues came up for discussion."
The statement said that many suggestions at the last meeting in 2016 have helped guide Indian policy-making and that Modi said he appreciated the "focused suggestions" made this year and that "scope for reform in many areas still exists".
Modi was quoted as saying he looked forward to "various opportunities" for cooperation between India and Saudi Arabia, the second biggest oil exporter to the country behind Iraq.
State-run Saudi Aramco, which on Sunday launched a new office near New Delhi, is in talks with several Indian refiners for a possible joint venture by next year.
Its Chief Executive Amin Nasser told the conference after the Modi meeting that India's oil demand would double by 2040 to about 10 million barrels per day, making it the world's largest market for the fuel and a priority for the company.
In the meeting, Modi thanked Russian President Vladimir Putin and Rosneft for their support to India's energy sector. The two leaders were instrumental in helping to seal Rosneft's $12.9 billion acquisition of India's debt-laden Essar Oil, strengthening ties between the world's largest oil producer and the fastest-growing fuel consumer.
In another vote of confidence for India's energy sector, BP and Reliance have previously said they would jointly invest $6 billion to boost India's gas output. A BP executive said on Monday that the company was "excited about gas, upstream and digital innovation in India".
Alay Patel, a senior analyst with consultancy Wood Mackenzie, the global president of which also met Modi, said that India's domestic energy production outlook was positive thanks to steps such as a simplified licensing regime and clarity on contracts.
"But more is needed," said Patel. "Allowing marketing and pricing freedom for all gas production, regardless of shore status and contract vintage, would incentivise companies to develop gas in the less explored basins."
Richard Thaler wins 2017 Nobel Prize in economics
GENEVA, Oct 9: U.S. academic Richard Thaler, who helped popularise the idea of “nudging” people towards doing what was best for them, won the 2017 Nobel Economics Prize on Monday for his work on how human nature affects supposedly rational markets.
Influential in the field of behavioural economics, his research showed how traits such as lack of self-control and fear of losing what you already have prompt decisions that may not have the best outcome in the longer term.
“I think the most important impact (of my research) is the recognition that economic agents are human and economic models have to incorporate that,” Thaler, a professor at The University of Chicago Booth School of Business, said in call broadcast at the Nobel news conference.
Awarding the 9 million Swedish crown ($1.1 million) prize, the Royal Swedish Academy of Sciences said: “Richard Thaler’s contributions have built a bridge between the economic and psychological analyses of individual decision-making.”
“His empirical findings and theoretical insights have been instrumental in creating the new and rapidly expanding field of behavioural economics, which has had a profound impact on many areas of economic research and policy.”
Thaler brought to prominence the idea of “nudge” economics, where individuals are subtly guided toward beneficial behaviours without heavy-handed compulsion, the theme of a 2008 book he co-wrote which caught the eye of policymakers around the world.
In researching how self-control - or the lack of it - Thaler touched on an age-old problem: why New Year’s resolutions to change aspects of your life are notoriously hard to keep.
The issue has relevance for economics as individuals’ tendency to fall prey to temptations often negatively affects plans to, for instance, save for retirement.
Together with Professor Cass Sunstein, he argued that society - while maintaining freedom of choice - should actively try to guide individuals in the right direction.
Their book, titled ‘Nudge: Improving Decisions about Health, Wealth, and Happiness’ became popular with some western politicians seeking ways to encourage their citizens to save and live healthily, without incurring voters’ wrath for raising taxes or banning behaviour outright.
“This has also been used in public pension systems in the United States and the general idea of ‘nudging’ ... has made a breakthrough in public policy making,” said Torsten Persson, economics prize committee member.
“Not only in the United States - there’s also a nudging unit for the UK government, there’s one for the Australian government, it even affects the Swedish government when they think about these things.”