‘Both STT, CTT rates are already very low’

For Shaktikanta Das joining the Finance Ministry as the Revenue Secretary just days before the much-awaited first Budget of the Modi Government was not difficult, thanks to his stint as Joint Secretary in the Budget Division. A day after the Budget, Business Line caught up with him to understand the finer points in the announcements. Excerpts from the interview:

What is the roadmap for Goods and Services Tax?

The Finance Minister has clearly stated in his Budget that it will be done this year. Meetings with State Finance Ministers have taken place in July and more such meetings with individual State Finance Ministers will take place. At the official level there have been a good number of interactions with State Government officials.

Now, there are just 2-3 major areas where there is no convergence. These mainly relate to inclusion of petroleum products, alcohol and entry tax in GST. States have some suggestions on the compensation mechanism in GST.

There is reasonable expectation and optimism on our part that we will be able to resolve these two issues. If we succeed, we will be in position to introduce the legislation in the Winter Session.

What would be the timeline for introduction of GST? Can you give us a specific date?

I would not like to give a timeline. The Finance Minister said it will be during this year, so we will definitely do it before March 31, 2015. Our efforts would be to do it at the earliest, so that it can be rolled out from 2015 onwards. Giving a date for introduction of GST has no meaning. We do not want to bind ourselves to any date.

The Economic Survey has suggested we can start with CGST (Central Goods and Services Tax), and most economists also think so. So can we start with CGST and then move to full GST?

When we are reasonably confident and optimistic that we will be able to implement GST directly, why think of a sub-optimal solution?

What is the current status on the Direct Taxes Code?

There are two streams of inputs we are receiving. One section feels we should go ahead with the revised draft on DTC which is based on the recommendations of the Parliamentary Standing Committee. The other feels that the DTC in the present shape is not enough and something more needs to be done. So, the Government will take a comprehensive view of the whole matter and take a decision. The issue is under review and examination.

There are provisions, like one related with withholding tax, to deepen the debt market. What is the implementation roadmap for these provisions?

Once the Finance Bill is passed, the notifications will be issued. Currently, you can raise ECB (external commercial borrowing) and pay 5 per cent withholding tax only if it is infrastructure bond. We are removing that classification of infrastructure and others. Someone goes for ECB to invest in the country irrespective of the sector. The overall ECB caps are there, so within those caps flexibility should be available to the players. They can get the money and invest even in manufacturing facilities.

After the amendment, 5 per cent withholding tax provision will not be restricted just to infrastructure sector, but to all the sectors. We expect that through this route a lot of money will come into the country and will get invested for capital expenditure. The revised provision will be applicable from the date of notification.

Why have you not included high-end electronic items, such as LCD and their components, when reversing the inverted duty structure?

The idea is that duty on raw materials and intermediate good should be less than the finished products. So, if they are able to access the raw materials and the intermediate components at a lower rate by paying lower Customs duty and making products here, paying local excise duty is good.

You have to strike a balance. There are certain items under ITA (Information Technology Agreement). Please remember inverted duty structure is a process. It has to be done over a period of time. Some sectors, which have come to our notice, we have corrected. As and when other sectors come to our notice, we will look into that.

The stock and commodities market seem to be disappointed as the Budget has not revised the Securities Transaction Tax (STT) and the Commodities Transaction Tax (CTT). What was the reason behind this decision?

I don’t know what is the expectation? Because the current rates, of both STT and CTT, are very low. And we have also prescribed that if you have paid the CTT, income from such a transaction will not be treated as speculative income. This, by itself, is a very strong signal. There has to be a tax and rates are very low.

People were also expecting some relief on gold — of import duty being lowered from 10 per cent. Since duty revision can happen outside the Budget, can we expect something during the current fiscal?

The current account deficit, like the fiscal deficit, had been a matter of concern. Things have improved. CAD came down at the end of the last fiscal.

But we need to be cautious, considering the volatility in international markets. International crude prices are rising due to the Iraq problem. So, we have to wait and see how that plays out.

I cannot say about the future. As of now, all I can say is that there is no decision to reduce the duty. The position is constantly changing, we will see.