Policy review countdown
With reference to “RBI may pause this time, but rate cut likely in Dec” (September 26), the “outcome” of a poll conducted by Business Standard that involved key bankers, economists, rating agency executives and bond market players amply indicates that the Reserve Bank of India (RBI) may maintain status quo when the newly constituted Monetary Policy Committee (MPC) meets at its bi-monthly monetary policy review on October 4. It gains more significance as there is no marked unanimity amongst them over what could possibly be the final call of the new incumbent at the central bank on this matter.
However, it’s strongly felt that the views of Upasana Bhardwaj, senior economist with Kotak Mahindra Bank, are most convincing in the economic scenario. At the same time, I beg to differ with Soumya Kanti Ghosh, chief economist with State Bank of India though he is confident of a 25-50 basis point rate cut in the ensuing meet. Perhaps, he may be sounding “overoptimistic” as no one else is toeing his line which calls for a huge cut, that too in one go. Incidentally, the new incumbent at the RBI has reportedly down played the risk of inflation and harped on the focus on growth while exchanging his views with half-a-dozen economists last week. Why the sudden change of heart at Mint Road?
In any case, all this must have been music to the ears of Arun Jaitley, our “growth”-centric finance minister. One really wonders whether Dr Urjit Patel would be obliging him with a memorable “return gift” (a rate-cut) on October 4 for his “generosity” in preferring him (Patel) to several other key contenders for the coveted position. Mind you, the government has already named its three nominees on the newly refurbished MPC. Let us wait and watch for D-Day.
S Kumar New Delhi Goods and Services Tax (GST) Council with regard to administrative control over entities with annual turnover of up to ~1.5 crore has brought about a degree of clarity on jurisdiction. But the talk of a “cross empowerment” model based on risk evaluation for entities with turnover of above ~1.5 crore to ensure such categories of suppliers of goods and services deal either with the Centre or state, as rightly pointed out, may prove tricky. This would lead to uncertainties both among tax authorities at the Centre and states as well as the assessees in this category. This is certainly not the best way to usher in such radical tax reforms across the country.
Such bizarre thought, therefore, deserves to be discarded. By its very nature, dual control under the GST regime is unavoidable. Yet, both the Centre and the states can jointly evolve a workable mechanism to mitigate any possible hardship to the assessees emanating from dual control. Incidentally, Article 269A(1) of the Constitution specifically empowers only the government of India to levy and collect GST on supplies in the course of inter-state supplies. Any dilution to this would be liable to challenge.
In the euphoria over the GST becoming a reality, what has not received adequate attention is the adverse effects of pegging exemption limit at ~20/10 lakh for goods in particular for small manufacturing units with annual turnover above ~20/10 lakh but below 1.5 crore. At present, full exemption from excise duty without input credit is available to small-scale units with annual turnover below ~1.5 crore that gave them a certain degree of competitiveness vis-à-vis big enterprises. If such units are also kept out of the compounding scheme, as is being talked about, this would strike a severe blow to a sector whose contribution to the gross domestic product and employment generation potential has been quite substantial. Let the GST regime not appear custom-made for the organised sectors alone.
S K Choudhury Bengaluru