Two days ahead of presenting the Budget for 2011-12 on February 26, Finance Minister Pranab Mukherjee on Wednesday exuded confidence that the economy, aided by the stimulus measures in place, would achieve a growth rate of over 7.5 per cent during the current fiscal and sustain the momentum with a GDP expansion of over eight per cent the year after.
In his address at a function to mark the ‘Central Excise Day’ celebrations here, Mr Mukherjee acknowledged that apart from helping generate revenue for funding health, education and other social sector schemes, the element of Central excise has successfully played the role of a fiscal tool to spur the economy. “Lately, the Central Excise has also been used as a fiscal tool, to cushion the impact of the global recession on the Indian industry. It is reassuring to note that the slew of fiscal stimulus measures taken by the Government, including that of reducing the Central Excise duty, has had a positive impact on the Indian economy,” he said.
Alongside, while being silent on whether the stimulus measures would have a role during the new fiscal also Mr Mukherjee said: “…as per the IIP data for December, 2009, it has shown an impressive 16.8% growth over the last year, suggesting that we may end the year 2009-10 with a growth rate of over 7.5% and next year growth at over 8%. Indian economy need to grow in double digit to eliminate poverty and illiteracy in the country. These goals can be achieved with a growth which is inclusive in nature and encompasses all segments of the society.”
As part of the stimulus packages to combat the slowdown in the wake of the global downturn that impacted all economies from the second half of 2008, the government had slashed the excise duty from 14 per cent to eight per cent in phases while reducing the service tax from 12 per cent to 10 per cent.
Early decision on GST
On the differences with states over the proposed Goods and Services Tax (GST) which has led to a delay in its rollout from April 1, 2010, Mr Mukherjee was hopeful that an amicable solution would be found soon. “I am confident about the competence and efficiency of our people who are engaged in the discussion with the state governments to find an acceptable solution, so that we can arrive at a decision as early as possible [on GST], he said.
Exhorting the CBEC officials to rise to the occasion and ensure a smooth transition, Mr Mukherjee said: “Introduction of GST will bring in changes in the current architecture of Central excise and service tax. I am sure that the department will demonstrate its willingness to adopt a new philosophy of tax administration, and manage the transition smoothly. This will require re-engineering the business processes and harmonization with the states. There are problems ahead, and it is naive to think of success without hurdles. Ours is a federation and each state has a say about the different aspects of the GST model.”
The essential divergence of views is over the structure of the GST which is to replace a host of indirect taxes at both the Central and the state level. While the empowered committee of state finance ministers has favoured two major tax rates for goods, apart from a special rate for bullion along with an exemption list, the Centre has sought a single rate for goods under GST.
The empowered panel is slated to have further discussions with the empowered panel to sort out the issue and pave the way for implementation of GST which would also necessitate constitutional amendments to enable both the Centre and the states to tax goods and services from manufacturing to the sales stage.