It is prudent not to create uncertainty: Arun Jaitley

Written by Arup Roychoudhury | Arun S | Updated: Jul 11 2014, 17:27pm hrs
Arun jaitley budgetBy next Budget, we will have a clear road map: Arun Jaitley (IE Photo)
Finance minister Arun Jaitley, after presenting his maiden Budget, said more measures, including on reviving SEZs, are in the offing. In an interaction with FEs Arup Roychoudhury and Arun S, Jaitley said he would like to see the Insurance Laws (Amendment) Bill passed by Parliament with foreign investment at 49% and without capping the foreign partners voting rights. Edited excerpts:

Your predecessor used expenditure compression to meet the fiscal deficit target. How will you manage to meet the 4.1% target

To tackle fiscal deficit, you should spend less or earn more. The ideal situation is that you should earn more. If you spend less, you are contracting expenditure and you will end up contracting some parts of the economy. I have looked at the unresolved issues and the problems that the previous government left behind. In 45 days, I have tried to address most of them.

What happens with pending issues on retrospective taxation

There are four clear issues which come out here. Does Parliament have the jurisdiction to legislate retrospectively It has and I wont curtail that jurisdiction. Secondly, will this government rely on retrospective tax legislation No. Ordinarily, we will not retrospectively legislate to create fresh liability, which actually means that if some old taxes are being collected for the last 40 years and some technical problem arises, you can correct that. But we will not create new liabilities with effect from a back date. Thirdly, if the 2012 amendment remains, are fresh notices going to be issued under those amendments Assessing officers will not issue them. They will report the matter to CBDT, which will have a permanent mechanism to look into it. Lastly, what happens to the past cases They are pending in courts and other tribunals. We will wait for the judgment and legal process can resolve those cases.

Why was gold import duty not cut despite the current account deficit being under control compared with the last fiscal

On CAD, revenue deficit and fiscal deficit, we have to be very cautious. We are not taking any such decision now.

You have hiked the foreign investment cap in insurance to 49% despite the BJP being against it earlier. When you table the Bill in Parliament, will you cap the foreign partners voting rights at 26%

What I have announced reflects the governments policy and the party will support it. The issue on voting rights will have to go to Parliament. We prefer a 49% cap without any rider. This is a composite cap, it can include FII and FDI. We will soon bring the Bill to Parliament.

Do you have a roll-out date for goods and services tax What issues are pending

There are two issues the states want a central sales tax compensation in order to trust the Centre and their stand is reasonable. The credibility of the Centre depends on how fast I can mobilise the resources and have a road map for giving the compensation. Once I establish my credibility with them, which I hope to do in the course of the year, I will then bring the constitutional amendment and the concerned legislation. The second issue is about states wanting some items to be out of the ambit of GST. That is what the empowered committee has said and we will see what is to be done. Whether you get an ideal GST or a good GST is what we have to see. Though there is some opposition from the BJP- and ally-ruled states such as Gujarat and Punjab, I will make others in the government persuade them.

Banking consolidation is a proposal you agree with. Will the government take an initiative

The consolidation process is important as if banks have more money, they will be able to expand faster. I am not going to lower the 51% government shareholding. But over the next three years, they should have enough capital.

You budgeted an oil subsidy of Rs 63,427 crore, of which Rs 35,000 crore has been paid for in the fourth quarter last fiscal. Wont that burden upstream firms

We are not necessarily trying to burden them. We will look at the accounts at the end of the year. Petrol subsidies have already gone. Some under-recoveries in diesel are left and they too will be finished soon.

There has been some criticism on the road map on rationalisation of subsidies not being spelt out clearly.

I have not spelt it out in detail because I have provided for an expenditure management commission. By next Budget, we will have a clear road map.

In the Budget you said you will review the Direct Taxes Code in its present shape. What are your plans

I have gone through the DTC as the leader of Opposition. In the last 45 days, I have not had an opportunity to revisit it. Before I make any further comments, I need to go the root of the matter and speak to all the stakeholders. We will not shy away from any decisions.

You are likely to forgo Rs 22,200 crore in direct taxes due to tax incentives. After two years of not meeting the tax target, can the revenue department meet it this time

We will gain Rs 7,455 crore in indirect taxes, and therefore, net tax forgone will be Rs 14,745 crore. When you take major steps to boost manufacturing, attract investment, solve pending issues, the hope is economic activity will pick up. I prepared my Budget with a 4.1% fiscal deficit target already announced, and therefore, it is prudent economic planning not to create uncertainty and go with the tax targets.