In an interview to Supriya Shrinate of ET Now, the FM said that 11 months of GST revenue collection but 12 month of expenditure this year has made a significant difference to the fiscal math. Edited excerpts:
Supriya Shrinate: You have introduced long-term capital gains (LTCG) tax in a non-disruptive way. But why have you not done away with the STT? Does it need to coexist with LTCG? Are you open to a review?
Arun Jaitley: These are questions which can arise. But, at present, it remains. I do not want to give any cause for any speculation. Even with the short-term capital gain tax, the STT exists.
Supriya Shrinate: Is it fair to assume that you have perhaps taken the first step to bringing equities and taxation at par with other instruments? Are we perhaps seeing the first signs of a larger step?
Arun Jaitley: If you give preference to one asset class, then corresponding investment into the other areas whether it is manufacturing or property does not take place adequately. I do not want to add to any market speculation because I would like to see the markets stabilise. For now, this is the decision and this decision remains as it is.
Supriya Shrinate: Was one of the decisions to impose LTCG also done with an intention to tamper the irrational exuberance that was being seen in the market?
Arun Jaitley: No. There are small investors who needed to be protected, if they make some money. Therefore, small investors who earn up to a Rs 1 lakh a year from the market were all exempted. On the other hand, we found that there were a very large wealthy investors, domestic as well as international. In today's set of situation, to continue with an exemption for the wealthiest is against the grain. This is particularly when you need revenue social sector schemes.
Supriya Shrinate: Do you believe the market is perhaps not one or two but many steps ahead of fundamentals?
Arun Jaitley: Indian market is matured. It has withstood the impact of the nuclear tests or the cash ban and GST. It withstood all such events and strengthened beyond a point. Only those with some myopic vision will say, oh! One day the Sensex fell, this is a no confidence in the economy. That is a very myopic analysis.
Supriya Shrinate: The proponents of the government investment will cheer the death of fiscal "fundamentalism". They are those who are warning you of consequences. By and large, people have made their peace with the fact that this was a disruptive year due to the GST and you would give yourself some elbow room on the fiscal deficit. But it is the revenue deficit that is worrying a lot of people. They say it is wasteful expenditure.
Arun Jaitley: No, it is not. Nothing is wasteful. Let us be very clear, the revenues also are moving up quite satisfactorily because, as far as fiscal deficit is concerned you must appreciate that this is the first time that I have not be able to meet my 3.2 per cent fiscal deficit target. Otherwise, I have met the target in every year. One of the principal reasons why I have not been able to meet the target this time was the lower receipts from spectrum auction. Besides, dividends were less from the CPSEs and the RBI. Cumulatively, this is a fairly large amount. We covered up a lot of it with extra disinvestments and budgetary savings. But at the end of the day, what also made a very significant difference was the fact that we had only 11 months of GST revenue collection this year. You have 11 months of GST collection and 12 months of expenditure. This is a statistical slippage which has taken place.
Supriya Shrinate: The final figures may actually look different from what they are right now. But in your Budget next year, you are expecting a tax revenue growth of 16 per cent. Are you placing too many bets on the GST. It has not stabilised just yet. From where is this optimism coming from?
Arun Jaitley: As far as direct tax is concerned, we are well ahead of the 16 per cent. Direct taxes are covering up for it. As far as the GST is concerned, I think that is the elephant in the room in the sense that nobody knows which way it is going. So far, we are having teething trouble putting all the mechanisms for anti-evasion in place. But once we are able to do that, I am quite certain that the GST revenues will increase. My fundamental faith in that is based on the fact that if your revenue base which has increased significantly from 64 lakhs we are up one crore plus.
Supriya Shrinate: Compliance will get better.
Arun Jaitley: Obviously. With the number of assesses adding up every day and if compliance gets better, surely we are going to have a much higher GST revenue.