Exporters have demanded an exemption mechanism instead of first paying tax and then claiming refund. Reuters file image.
In the wake of a precipitous fall in the country’s economic growth compounded by problems posed by GST, the government has lined up a series of meetings to discuss remedial measures on Tuesday.
To begin with, Prime Minister Narendra Modi will meet Finance Minister Arun Jaitley along with officials of the top ministry and the Prime Minister’s Office, on bringing back India’s economic growth to near 7% levels in the next couple of years.
India’s GDP slipped to 5.7% in the April-June quarter this year, from a high of 7.9% in the same quarter, last year. Sources close to the development said the prime minister is expected to ask the secretaries to come up with out-of-the-box solutions to recharge India’s economy, which has experienced a dip on the back of two major reforms – demonetisation and GST.
Separately, the government has called a meeting of the Committee on Exports on Tuesday.
The meeting of exports committee will be held under the chairmanship of Revenue Secretary Hasmukh Adhia.
It will look into the issues facing the export sector and recommend a suitable strategy to the GST Council for helping the export sector in the post-GST scenario. Exports have been sluggish in the past, and exporters are facing problems of working capital.
Liquidity issues have arisen as the refund mechanism requires payment of GST first and refund subsequently.This also leads to blockage of working capital.
Exporters have demanded an exemption mechanism instead of first paying tax and then claiming refund.
Other macroeconomic data including price rise, industrial production, external trade and current account deficit have all at their lowest in three to five months, the recent government data shows. Rise in petroleum prices have added to the woes.
While inflation has raised its head again with a steep rise in food and oil prices, CAD has risen to a four-year high of $14.3 billion in the first quarter of this fiscal. This is 2.4% of GDP.
Tax revenue collections, which were presumed to be the highest this year at Rs 95,000 crore in July alone, now seem to have majorly gone in input credit refund, leaving the government with lower than ever revenues.
Sources said, the prime minister may even ask officials the possibility of a cut-down in expenditure to save the government from going into a higher than Budgeted fiscal deficit regime.
The meeting comes two days after Chief Economic Adviser Arvind Subramanian briefed Modi and the PMO on the prevailing economic situation.