Arun Jaitley’s name will always be linked to two major reforms – introduction of the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC). And, of course, remembering his stint as Finance Minister without recalling the Demonetisation of all ₹500 and ₹1,000 notes, a decision announced by Prime Minister Narendra Modi on the night of November 8, 2016, withdrawing 86 per cent of India's currency by value, would be incomplete.
How did he manage to end the impasse on GST? First, he provided compensation to the States for their revenue loss for the first five years and enshrined that through a law. Second, he managed to persuade States to introduce petrol and diesel in the GST legislation but left it to the wisdom of the GST Council on announcing a date of implementation. He changed the voting pattern in the GST Council, so that neither the Centre alone nor States together could veto any proposal. Finally, he evolved a consensus on not casting the rates in stone, so that changes can be made at any time by the GST Council. All these resulted in introduction of GST within two and half years of the formation of the first Narendra Modi Government.
Jaitley chaired 32 out of 36 meetings of the GST Council. These meetings saw over 900 decisions taken and not a single one required voting even when the GST Council had members from opposition-ruled States such as West Bengal, Punjab and Kerala. His successor, Finance Minister Nirmala Sitharaman, is also following the same path of evolving a consensus.
Another success of Jaitley was the IBC , which brought about a paradigm shift in recovery for banks. He proposed a time limit for resolution, which has been helping banks to improve the balance sheet.
In a country where cash is king and over 95 per cent of transactions are in cash, it was not easy to even think of taking out 86 per cent of the currency. But Prime Minister Modi took the risk and his trusted lieutenant Jaitley had to oversee the exercise. Jaitley and then Economic Affairs Secretary Shaktikanta Das worked round the clock to ensure that the transition was not very painful. Jaitley used to say a Government needed to be proactive as well as responsive in dealing with situations such as demonetisation. This could be the reason over 80 circulars and clarifications were issued between November 8 and December 30, 2016. People criticised the frequent changes but Jaitley said that if there was an issue, it needed to be sorted out immediately.
Another key legislation or rather a set of key legislations related to black money, which was an election plank for the BJP during the 2014 elections. He was the brain behind the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Comprehensive Benami Transaction (Prohibition) Act, and amendments in the Foreign Exchange Management Act (FEMA), which would allow seizure and eventual confiscation of assets of equivalent value situated in India and levy of penalty and imprisonment up to five years. The Income Declaration Scheme, 2016, gave those who had not disclosed income or paid taxes on it in the past the opportunity to do so.
He also introduced a host of other measures against black money such as prohibition to accept or pay an advance of ₹20,000 or more in cash for purchase of immovable property and making it mandatory for anyone to quote their PAN for any purchase or sale exceeding ₹1 lakh.
Jaitley is credited with presenting five full budgets, bringing 90 per cent of companies under the 25 per cent corporate tax bracket and tweaking the income tax rates to 5, 20 and 30 per cent.