FM Arun Jaitley says a civilised tax policy on cards

Union finance minister Arun Jaitley said in the Lok Sabha on Wednesday that "the government would endeavour to usher in a civilised tax policy to attract overseas investment".

Justifying the need for a civilised tax regime, Jaitley took a dig at the erstwhile United Progressive Alliance (UPA) government saying "ultra-aggressive tax policy has not helped in getting any additional revenue".

In an oblique reference to the Vodafone case, he said that the retrospective tax amendment brought during the UPA regime had only brought a bad name to India rather than garner any additional revenue.

"We inherited an economic situation of negative sentiment where none was willing to invest. There was reduced economic activity. The negative sentiment was further accelerated by ultra-aggressive tax policy," Jaitley said.

The minister also talked about the move to bring much-delayed goods and services tax (GST), on which he will meet state finance ministers on Thursday.

"GST is not an issue on which we are divided on partisan line. Most state governments are going to benefit. The revenues are going to improve as  and states are concerned, and I wish to assure this House with this commitment," he said.

Underlining that growth would depend on the states, Jaitley talked about cooperative federalism and announced release of Rs 11,000 crore to states this fiscal as part payment towards CST compensation to facilitate rollout of GST.

Jaitley was replying to a debate in the Lok Sabha on Supplementary Demands for Grants for an additional expenditure of over Rs 12,500 crore.

However, the actual cash outgo would be Rs 500 crore. The demands were later passed by the House. On the growth prospects, Jaitley said that there are challenges but hoped that it would be within the projected range of 5.4-5.9 per cent in 2014-15 and cross six per cent in the next financial year.

Economic growth fell to subfive per cent in two consecutive fiscals 2012-13 and 2013-14, Jaitley said, adding it had an impact on revenue collection, fiscal deficit and government's expenditure on developmental works.

For the second quarter of FY15, GDP grew 5.3 per cent compared with 5.7 per cent in the previous quarter mainly due to slow growth in the manufacturing sector.