Pranab Mukherjee and Ficci president R.V. Kanoria in New Delhi on Saturday. Picture by Ramakant Kushwaha
New Delhi, March 24: Finance minister Pranab Mukherjee today said he would work towards building political consensus to implement the goods and services tax (GST) and the direct tax code (DTC) soon.
However, Mukherjee added that there was a long way to go before the final implementation took place. It does not depend on me. I require two-thirds majority in both houses of Parliament to make GST operational. Subsequently, a minimum 15 of the 28 states in the country will have to ratify the proposal as passed by Parliament.
This was essential, he said, as a smooth and effective implementation of GST could only be achieved by aligning central excise duties, service tax and state VAT.
At a post-budget interactive session with the executive committee of Ficci today, Mukherjee pointed out, I shall have to take note of my strength in the Lok Sabha as no tax can be levied without the approval of Parliament, no expenditure can be undertaken and no money can be withdrawn without the authority of the law.
The coalition government has been hamstrung in pushing through essential reforms such as the DTC and the GST, which could reduce taxes and spur economic growth, because of resistance from allies and Opposition parties.
On rising crude oil prices, Mukherjee said the government would take and implement some difficult decisions in the coming months.
He added that the government had to be realistic in its approach and keep in mind the present scenario. We cannot go on with the approach that is divorced from the reality. But I believe that the budget is not the only exercise through which all the work is to be done because I cannot ignore the ground reality that mere announcement of decisions, if they cannot be pursued, is serving no purpose.
Drawing confidence from the easing of inflation, Mukherjee said the government expected interest rates to come down in the days to come. It will, thus, help in boosting investment confidence.
Core inflation has moderated in the past three months and in the coming months we are looking at a reversal of the policy rate, which should help in improving business sentiments, he said.
However, the possibility of a further spike in crude oil prices could mute the quantum of rate cut by the Reserve Bank. Crude oil prices are hovering around $125 per barrel.
Ficci president R.V. Kanoria cautioned that the proposal to partially restore the rates of service tax and excise duty to pre-crisis levels, though necessary for revenue augmentation, might be inflationary and counter-productive in terms of inhibiting a shift in the currently hawkish monetary stance.
Mukherjee also downplayed the draft CAG report on coal block allocations. After obtaining the comments of the ministries, 90 per cent of the issues raised by the CAG are dropped. That is the normal practice and it is going on for the last 150 years, he said.