FM Arun Jaitley promises 'civilised' tax regime to attract investment

India will soon raise the foreign investment cap in insurance sector and work for making the tax regime "civilised" to attract overseas investments, Finance Minister Arun Jaitley said on Wednesday while exuding confidence of achieving 6 per cent growth next fiscal.

Underlining that growth would depend on the states, he talked about cooperative federalism and announced release of Rs 11,000 crore to states in the current fiscal as part payment towards CST compensation to facilitate roll-out of the Goods and Services Tax (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. It was later passed by the House.

Referring to the Select Committee report on further opening of insurance sector, Jaitley said, "Large investments are waiting to come in. We have to open the doors."

The committee has suggested a composite foreign investment cap of 49 per cent in the insurance sector, as against 26 per cent FDI cap currently.

The government would endeavour to usher in a "civilised tax policy" to attract overseas investments, he said, adding FDI regime has already been relaxed in defence sector and has generated lot of interest from top global manufacturers.

On the growth prospects, Jaitley said 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 6 per cent in the next financial year.

Economic growth fell to sub-5 per cent in two consecutive fiscals in 2012-13 and 2013-14, he said, adding it had an impact on revenue collection, fiscal deficit and government's expenditure on developmental works.

A day ahead of his meeting with state finance ministers, Jaitley said the government will soon release Rs 11,000 crore towards Central Sales Tax (CST) compensation, as part of consensus building for GST rollout.

"...despite difficult and challenging situation, I propose to release about Rs 11,000 crore, which is one-third, this year as a part payment as a CST compensation to the states," he said replying to a debate on Supplementary Demand for Grants in the Lok Sabha.

CST compensation is one sticky issue that has been holding up agreement on introduction of the Goods and Services Tax (GST) regime to replace all indirect taxes.

Advocating greater powers for states, Jaitley said a principle of 'cooperative federalism' is being followed in setting up the new body in place of Planning Commission.

"Our government stands by the principle of cooperative federalism, empowering states, least number of central schemes and more state schemes," Jaitley said while replying to a debate in the Lok Sabha.