Promoters wishing to bid for their own stressed assets on the block for sale should first pay up their dues to the banks, finance minister Arun Jaitley said on Thursday, indicating the government’s resolve on the issue despite criticism from some quarters including embattled owners on the recent tightening of the bankruptcy law. Speaking at the HT Leadership Summit here, the minister also hinted that 12% and 18% tax rates in the goods and service tax (GST) regime could be merged once revenue collections gather pace while the 28% slab could be limited to a “very thin” list of luxury and “sin” goods. Last week, the government effected an ordinance to make sweeping changes to the Insolvency and Bankruptcy Code (IBC), 2016, to prevent wilful defaulters, dubious promoters, undischarged insolvents and other “unscrupulous, undesirable persons” from misusing the law.
In fact, the scope of the changes is so enormous that most of the promoters of over 300 stressed companies, including a dozen large bad debt accounts recommended by the central bank where the insolvency resolution process has been initiated, will be disqualified from acquiring assets of such firms. “If somebody says I owe the bank money, but I won’t pay the money, I won’t even service, but at half the cost I want my company back, I don’t think in India it is going to be acceptable,” Jaitley said.
The political process in India would not have accepted a situation wherein banks take a substantial haircut only to have the same promoters back, he added. On GST, he said merging of 12% and 18% slab would mean some items in the 12% bracket would move to 5%. The new indirect tax regime started with multiple rates in order to keep the tax incidence around the same level that existed pre-GST. Currently, GST has four broad tax slabs of 5%, 12%, 18% and 28%. Certain essential daily use items attract zero tax. Jaitley said India would eventually move to a two-tier GST, but how fast it could be done would depend on the revenue position of the government.