Gujarat Polls Triggered GST Changes, Says Sajjan Jindal
Shikha Sharma, MD of Axis Bank, caught up with JSW Steel’s Sajjan Jindal on GST, economy and much more.
Changes in the Goods and Services Tax structure is the government’s reaction to the pressure it faces in the upcoming Gujarat elections, said Sajjan Jindal, chairman of JSW Steel Ltd.
What’s encouraging is that the government has been responsive and is “open to ideas”, said the head of India’s largest steelmaker. The GST is a bold move and nobody knows the net results, Jindal said.
The Congress, led by party Vice-President Rahul Gandhi, has turned the GST into an election issue in Gujarat as it challenges the Bharatiya Janata Party that has been in power for over two decades.
Jindal said the GST simplified the taxation structure in the country. It’s a good step, he told Shikha Sharma, managing director of Axis Bank, at the Axis Capital Stars 2020 conference in Mumbai.
Watch the full conversation here:
Here are the edited excerpts of the interview:
Shikha Sharma: We heard the announcement on big changes on GST today. What do you think about it?
Sajjan Jindal: GST being a new tax is a bold move by the government and has been in the works for a long time. The previous governments didn’t have the capacity or the guts to implement the new tax. This is a global phenomenon but because it’s a new tax, nobody knows the net results. Hence, the government is modifying it and that’s a good thing because the government is open to new ideas which is encouraging. Also, our democracy plays an important role. The Gujarat elections are putting a lot of pressure on the government and they are reacting to that, making a lot of changes. That’s why today they announced these big changes in the GST. It is a good step and a good tax. We at JSW feel that it has helped us and has simplified taxation a lot.
Shikha Sharma: There has been a conversation that the GST will help GDP growth. Do you see that?
Sajjan Jindal: A lot of informal economy will be getting into the formal format due to the GST and will add a couple of percentage points to the GDP.
Shikha Sharma: What do you feel about global growth and the economy?
Sajjan Jindal: My take on the economy is in two parts, one is the public sector where the government is really investing and pushing forward in the infrastructure sector, housing, etc. On the other side, private sector is still sluggish and still not very enthusiastic about investments due to stressed and highly leveraged balance sheets. The good ones are still waiting and wanting to see what’s happening, whether we should use this money for consolidation and go through the NCLT or use that money to build capacity. So, it’s wait-and-watch on the private sector. They are not yet opening their purse as they call it.
Shikha Sharma: If you were taking a one- or two-year view, how do you see the steel sector itself? What do you think is happening in terms of steel prices, steel demand? Do you see any structural changes which will spur demand in the future? What is the impact of the minimum import price and how will that sustain?
Sajjan Jindal: Steel is a very basic material and is needed for everything. We have a very small capacity. As compared to China, if they can consume 700 million tonnes, we cannot stay at 80 million tonnes. We must consume at least 200-300 million tonnes. I am very bullish on steel... (and) am focusing growing it (the capacity) rapidly.
Coming to the MIP question, steel industry in India has suffered. Leaving aside Tata Steel Ltd. and JSW Steel, every other steel company has gone into the red and the reason for that is Chinese and other world steel producers were dumping steel in India at a very low price. JSW Steel is a very efficient producer and therefore could survive. Tata Steel, while being very efficient, had their back-up of raw material integration and therefore they could survive, but others really suffered.
Therefore, this government was very quick to understand and equipped them in less than two years. That’s what is needed to save the industry. This government is very responsive, understands the pain points and addresses them. After MIP got implemented, within three-four months, global steel prices went up along with raw materials and the commodity cycle. Today, MIP is $100 less than the international prices and it has no relevance, but it was available when we needed it. It was a good message to the world that they should not mess with India. Interestingly, after India took the action, Brazil, Malaysia, Thailand, every country started blocking China and China reduced their exports a lot.