Finance minister Arun Jaitley has assured that once the GST collections stabilise, the tax slabs would also undergo a change and one standard rate would come into force, instead of the two standard rates at present -- 12 per cent and 18 per cent.
GST collections have not been up to the mark as yet. It met its monthly target of Rs one trillion in only three months in the period between February 2018-19.
Even so, experts are optimistic about GST. Abhishek Jain, tax partner, EY, said, "GST has been a historic tax reform and even though the ride may have had some blockades initially, any rational person would appreciate the multi-fold benefits encapsulated in this reform."
In May 2016, the Insolvency and Bankruptcy Code was enacted in order to consolidate all existing insolvency and bankruptcy related laws. However, only the rules relating to insolvency have been notified so far. On insolvency, while the IBC has achieved its objective of empowering creditors, it is slipping on timelines.
Till December 2018, the average realisation against admitted claims was 50 per cent, which compares favourably to a recovery rate of 26 per cent in the pre-IBC regime. The total realisation till December stood at Rs 60,700 crore. But maintaining timelines has been a challenge. Of the 898 ongoing corporate insolvency resolution processes, 275 have breached the maximum stipulated 270-day deadline for resolution and 166 have crossed the 180-day deadline.
The threat of IBC has also pushed many smaller firms to settle with the banks. "The IBC was a step in the right direction, but with timelines getting stretched, the biggest challenge is implementation," said Abhishek Dafria, vice- president, ICRA, a credit rating agency.
The government has undertaken some reforms in the financial sector. These include the setting up of a monetary policy framework to target inflation, constituting a monetary policy committee (MPC), setting up the Banks Board Bureau (BBB), starting the process of consolidation in the banking sector and so on. However, the government’s tenure also saw many thorny issues come up, such as the independence of the Reserve Bank of India, which ultimately led to the resignation of then RBI governor Urjit Patel in December, 2018, and governance reforms in public sector banks.
Set up in June 2016, the MPC has been taking decisions on the monetary policy stance. However, BBB, constituted with the mandate to revamp public sector banks, has not gone beyond recommending the names of bank heads. Its role to help banks price their assets and on consolidation have taken a back seat as well.
Soumya Kanti Ghosh, SBI group chief economist, said, “The focus should be on continuing the reforms and ironing out people related issues. There should also be a consensus on government holdings in banks.”
The government passed some labour laws in Parliament, including the Model Shops and Establishments Act and amendments to the Apprentice Act. These did improve the employment market. Moreover, The Factories Act was amended to relax conditions for overtime and give more maternity benefits and so was the Child Labour Act to prohibit the employment of children under 14 years of age.
The government also notified The Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018, which allows companies to hire people for a fixed period.
However, when it came to the crux of labour reforms, the government got cold feet. In his 2016-17 Budget speech, finance minister Arun Jaitley had announced that there would be legislative reforms to simplify, rationalise and amalgamate the over 40 state and central labour laws into four Codes — a) wages; b) industrial relations; c) social security and welfare; d) safety and working conditions. However, none of these codes have come to pass.
Despite clearing the Bill to amend the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 in the Lok Sabha in March, 2015, the NDA government eventually had to eat humble pie and withdraw the ordinance in this regard.
The decision followed after vociferous protests by Opposition parties against the ordinance. The ordinance had first been issued in December, 2014, and re-promulgated thrice.
The NDA government faltered on direct tax reforms, although it did take some steps to reduce tax rates, increase the threshold for exemptions, and reduce so-called tax terrorism. Taking a U-turn on the Direct Taxes Code (DTC), in its very first Budget the government said that it would review the UPA government’s DTC draft, released in March 2014.
Since November 2017, the finance ministry set up two consecutive task forces to come up with a draft DTC. The second panel was to submit its report by February 28, 2019. However, the panel has sought an extension of three months, which means that the DTC draft can only be looked at after the next government comes to power.
Neeru Ahuja, partner at Deloitte India, said that after demonetisation the government’s focus shifted to tax evaders while reforms took a back seat. "We are still awaiting DTC and to that extent, reforms are an unfinished agenda," she said.
The government’s e-commerce policy is still being thrashed out. It has extended the deadline for submission of stakeholder comments on the draft policy to March 31 after online majors such as Amazon, Flipkart, Snapdeal, Ola, Uber, Netflix and Microsoft raised a number of issues against it. This means that the policy will not be implemented before the general elections since the model code of conduct has kicked in from March 10.
Protection of data is the highlight of the draft e-commerce policy which was released in February this year. Among other rules, the draft has proposed to grant domestic industry a three-year window to make the shift to mandatory local data storage and pushed for strict restriction on companies sharing the data of consumers for commercial purposes.
Though the government had announced that it would implement an Industrial Policy, it has failed to do so, primarily owing to the lack of a proper draft.
The ministry had announced that the final draft would be put out by January 2018. This was to absorb the 2011 National Manufacturing Policy and focus on Industry 4.0 and the government’s Digital India initiative. The initial document focused on job creation, foreign technology transfer, the growth of micro, small, and medium enterprises (MSME), and the goal to attract $100 billion foreign direct investment annually.
However, the Department for Promotion of Industrial and Internal Trade (DPIIT) later decided to do away with fixed targets for job growth in specific sectors and instead, was focusing on ‘wide growth’ for the next two decades.
(With inputs from Somesh Jha and Subhayan Chakraborty)