Key economic reforms and an overhaul of the countrys decades-old tax laws will form the core of finance minister P Chidambarams unfinished agenda from his four and a half year long tenure in North Block. Even though Prime Minister Manmohan Singh will be handling the portfolio, North Block insiders say a full time finance minister will be required to carry forward this agenda.
The biggest setback from Chidambarams sudden exit is expected to be to the finalisation of the goods and services tax (GST). Finance ministry officials conceded that with the ministers departure, there will be a great deal of uncertainty over the future of the GST. The empowered committee, headed by West Bengal finance minister Asim Dasgupta, was set to meet him later during the month to finalise a roadmap for the introduction of the tax.
A crucial part of Indias taxation reforms, GST aims to absorb service tax, excise duty and all state level duties and taxes into one single levy. A decision to move towards this tax regime was announced by Chidambaram in his Budget speech of 2006.
Similarly, the Direct Tax Code, the ministers pet project, to simplify the Income Tax Act, 1961 too may not see the light of the day. We do hope that the next government takes up the Code, an income tax department official said.
At the Economic Editors Conference last week, Chidambaram had said the draft code would be placed in the public domain soon. I have to read another 19 pages of the discussion paper. The discussion paper and the draft is ready, he had said at that time.
As FM, Chidambaram was also vocal about a blanket tax exemption to Special Economic Zones (SEZs)an issue which the empowered Group of Ministers led by Foreign minister Pranab Mukherjee has been debating for a long time now. It remains to be seen how this debate pans out going forward, although the UPA is likely to busy with more pressing matters in its short pending shelf life.
Meanwhile, other key economic reforms, in banking, disinvestment, pension and insurance too will be hit. Although the UPA government does not have enough time to get these Bills enacted, Chidambaram had been very keen to pursue them, especially after the Left parties withdrew support this July.
In fact, sources pointed out it was only because of his tacit support, that the New Pension Scheme is being rolled out for the unorganised sector, even without the passage of the Pension Fund Regulatory and Development Authority Bill.