Finance minister Pranab Mukherjee is hopeful that the goods and services tax (GST), which will replace central and state levies excise, service tax, value-added tax and local levies, will take off on the target date of April 1, 2010, although there are a host of issues yet to be sorted out.
The government is in conversation with all the states so that the deadline can be met, Mr Mukherjee said responding to a question raised by Sanjeev Chadha, chairman and CEO of PepsiCo, at the ETs breakfast session with the FM on Tuesday.
C Rangarajan, chairman of Prime Ministers Economic Advisory Council, however, said there are a host of technical issues involved in implementation of GST such as creation of data bank for inter-state transactions and these issues need to be sorted out.
The implementation of GST, tipped to be one of the biggest tax reforms in India that may help the country gain as much as $15 billion a year, is expected to play a key role in the countrys bid to get back into the 9% growth trajectorysomething all participants at the ETs session with FM, the top guns of Indian industry and bureaucracy, are eagerly looking forward to.
If the country has to get there, it needs its small and medium companies to do well. At present, however, most lending companies are reluctant to do business with small firms, said Harshpati Singhania, managing director of JK Paper, the countrys largest branded paper company.
The finance minister said the government is aware of the challenges faced by small firms but rejected Mr Singhanias suggestion for a government-sponsored fund for SMEs, saying he has given a larger mandate to SIDBI to look into it.
Responding to a plea from Pepsis Chadha for increased government support to the fruit and vegetable processing industry where only 2% of the food produced eventually gets processed, the FM said: We have tried to address the concerns in the recent budget where we announced concessions for cold storage chains and warehouses. The private food processing companies should take advantage of these initiatives.
As for Mr Singhanias call to open up the insurance and pension sectors to foreign direct investment (FDI), the FM said these issues require consensus among coalition partners and need to be discussed and debated in Parliament. He added that the government is working on the same.
Sushil Ansal, CMD of real estate developer Ansal Properties and Infrastructure, urged the government to provide industry status to the housing industry and extend the tax sops that the developers of affordable housing get through the section 80 IB by another year.
However, the FM said that benefits to developers for affordable housing was extended to project sanctioned till 2008 since it was a bad year for real estate. The government has announced subsidy for home loans up to Rs 10 lakh on a property that costs up to Rs 20 lakh.
India Infrastructure Finance Company (IIFCL) has also been given mandate to go for maximum investments in housing and infrastructure, Mr Mukherjee said.
Parag Parikh, chairman of Parag Parikh Financial Advisory Services, welcomed the governments pension scheme, but said there are some flaws in the process that need to be corrected. For instance, the decision to invest in index stocks could be dangerous as the list includes loss-making companies.
Mr Parikh also raised concerns over handing over the public money to a small number of pension scheme fund managers who also manage mutual funds.