Economy round-up: Tax collections jump; work on GST inches forward
Photo Credit: Shah Junaid/VCCircle

The central government’s tax collections for the first five months of the financial year rose 23% to Rs 5.25 lakh crore from Rs. 4.27 lakh crore a year earlier. This is more than 32% of the total budget estimate of tax collections for the financial year.

Citing finance ministry data, Business Standard reported on Tuesday that the collections had beaten the 11.73% growth target the government had set for 2016-17. Direct tax collections spiked 15% to Rs 1.9 lakh crore, achieving more than a fifth of the yearly target.

Meanwhile, even as the Union cabinet on Monday cleared the formation of a Goods and Services Tax (GST) council—a body chaired by the Union finance minister and comprising his counterparts from the states—news reports on Tuesday said that the Narendra Modi government is in favour of an 18-19% rate once the indirect tax regime comes into force.

The Times of India said that the government is likely to stick close to the 16.9-18.9% tax rate suggested by a panel on GST headed by chief economic adviser Arvind Subramanian, although some states like Kerala have been demanding that the rate should be higher than 20%. The final rate will, of course, be decided with the concurrence of both the Centre and the states.

In related news, The Indian Express reported that the government has no plans to modify the holding structure of the Goods and Services Tax Network (GSTN), which will provide the information technology backbone to the new indirect tax regime.

Several members of parliament, including the Bharatiya Janata Party’s Rajya Sabha member Subramanian Swamy, have been critical of the ownership structure of the GSTN, in which private companies own a majority 51% stake.

GSTN was set up in March 2013 as a not-for-profit, private limited company in which the Centre and state governments together hold a 49% stake. The remaining stake is being shared by companies including LIC Housing Finance, HDFC, HDFC Bank, ICICI Bank and NSE Strategic Investment Corp.

On Monday, the government decided to double the buffer stock of pulses in a bid to control spikes in their prices. With this, the total buffer stock limit would go from 800,000 tonnes to 2 million tonnes, or a tenth of the country’s total domestic production. Citing food minister Ram Vilas Paswan, the Mint newspaper said the increase in limits will cost the government Rs 18,500 crore.

Two straight years of drought saw a drop in production of pulses, raising prices and necessitating imports. An increased buffer stock will help the government intervene in times of a crisis through open market sales.

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