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GST rate hike not the answer, rationalisation is key: CII president

During their pre-Budget consultations with Finance Minister Nirmala Sitharaman, CII leadership has asked the government to focus on spending, even if it means a bigger budget deficit

twitter-logo Joe C Mathew   New Delhi     Last Updated: December 19, 2019  | 00:33 IST
GST rate hike not the answer, rationalisation is key: CII president

Apex industry chamber Confederation of Indian Industry (CII) has favoured rationalisation of Goods and Services Tax (GST) rates over across the board increase in rates to increase government's indirect tax revenues. "It will be suicidal to increase the rates. That's the feeling the industry has," says Vikram S Kirloskar, president, CII.

In an interaction with BusinessToday.In, the CII president said the Centre seems to be in favour of rationalising the rates. "We are suggesting to rationalise the rates, the number of slabs and simplify (the system further) so that you can expand the base," he says.

Kirloskar said their members are supportive of the government's move to tackle the problem of GST evasion and wanted it to be dealt with legally. "What we have said is we need to build better trust with the government and the industry, so deal with people who break the law on GST, but please don't criminalise (the ones who pay taxes)," he explains.

During their pre-Budget consultations with Finance Minister Nirmala Sitharaman, CII leadership has asked the government to focus on spending, even if it means a bigger budget deficit.

"In the previous years we have said (maintaing the level of) budget deficit is very important, this year we have changed that. We have requested the government to spend more," Kirloskar said, clarifying that this does not mean an aggressive change in budget deficit but something which is reasonable for a short time - one year or two years, and then try to get back to normal. The focus of expenditure should be infrastructure, roads, etc which has an impact on wide catagories like cement, steel, labour, etc, CII said.

According to Kirloskar, government borrowing becomes all the more important because private investments are unlikely to happen until demand bounces back. "People will not invest if they already have excess capacity. Take for instance, why would auto industry invest more when there is excess capacity? Although last year there were two new players who have invested quite a lot. So, maybe on an overall industry basis there is excess capacity and asking existing players to open more factories and all is impossible. Until car market increase in another half a million, you won't see increase in investments in capacity. You will see investment in products and tehnology and those kind of things, but not in capacity," Kirloskar, who is also the vice chairman of Toyota Kirloskar Motor said.

However, CII is not subscribing to a complete gloom and doom theory.

"There is definitely a slowdown and everyone understands that. But there are lot of CII members who are extremely doing well too. So its both sides, its not that everything is down," Kirloskar said.

The CII has asked the government to look at the taxation on equity, whether it is capital gains tax or dividend distribution tax or any other transaction taxes in the equity business to make equity more attractive for investment. "We have also asked to look at NBFC issues, as the NBFCs have a problem on liquidity and MSME are facing liquidity crisis, how to help sort that out."

ALSO READ:GST Council meet: Tax rates remain unchanged, steps taken to boost compliance

ALSO READ:GST Council extends deadline to file annual returns for FY18

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Tags: CII | GST
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