GST to energise growth to 8%: Shaktikanta
5 Aug 2016 11:05 PM GMT
Economic Affairs Secretary Shaktikanta Das said on Thursday that the goods and services tax (GST) will unleash a lot of energy into the Indian economy and push the gross domestic product (GDP) growth to over 8 per cent in medium term. “External factors continue to be of concern. Policy focus will be to strengthen our firewalls against such vulnerabilities,” Das tweeted.
Finance Secretary Ashok Lavasa said that that all efforts are being made to roll out the GST from April 1, 2017, and allayed fears that it will have an impact on inflation even if the rate is kept at 20 per cent. “All efforts will be made with cooperation of every one to meet the deadline of April 1, 2017... There is no such (price rise) threat. States and the Centre will take a call on rates that will take into account all issues, including the concern related to inflation,” Lavasa told reporters.
In the biggest tax reform since Independence, the Rajya Sabha on Wednesday night approved the Goods and Services Tax (GST) bill to replace a raft of different state and local taxes with a single unified value added tax system to turn the country into world’s biggest single market.
Chief Economic Advisor Arvind Subramanian said that even if the GST rate is 18-20 per cent, there would be no average impact on inflation.
“Our calculation suggests that if you allow 18-20 per cent (GST rate), there is no inflation impact on average. Of course, a few commodity here and a few commodity there, the incidence will go up. But on average, especially for the poorest, I will be very surprised if there is any impact on inflation at all,” he told CNBCTV18.
The Constitutional Amendment Bill did not have the GST rate and the GST Council, which will have representation from both the Centre and states, will now work out a rate.
The subsequent legislations Central GST (CGST) and Integrated GST (IGST) -- which are likely to come up for discussions in the next Winter session of Parliament -- would mention the GST rate.
A panel headed by Subramanian had last year suggested 17-18 per cent ‘standard’ rate for bulk of goods and services while recommending 12 per cent for ‘low rate goods’ and 40 per cent for demerit goods like luxury car, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 per cent.
The Finance Secretary said the GST regime would bring more compliance, which would mean more transactions falling into the tax net. “It will bring more efficiency and better prospects for growth,”
Lavasa said.
Meanwhile, buoyed by the passage of the GST Bill in Rajya Sabha, industry leaders said the roll out of the indirect tax reform will lure more foreign investors to India, improve the country’s manufacturing competitiveness and boost economic growth by nearly 2 per cent.
“GST will be the most pivotal reform since 1991 which will make India an attractive destination for foreign investments. Manufacturing will get more competitive due to the emergence of a national market as against the present fragmented one. “The low tax to GDP ratio of the country will go up, helping the government to adhere to fiscal discipline and keep the inflation in check. It will improve productivity and transparency,” the Chairman of Hinduja Group of Companies India, Ashok
P Hinduja, said.
FM unveils roadmap for achieving daunting April 1, 2017 deadline
Setting a target of April 1, 2017 for rollout of the Goods and Services Tax, the government on Thursday unveiled a detailed roadmap for its implementation and said it is aiming for an “optimal” rate of taxation though the final decision will be taken by the GST Council. “What we need is an optimal (GST) rate,” Finance Minister Arun Jaitley said while addressing a press conference a day after the Rajya Sabha approved the historic Constitution Amendment Bill, paving way for a complete overhaul of the indirect tax regime in the country. Once implemented, the GST will subsume various taxes including excise, services tax, octroi and other levies and the proceeds will be shared between the Centre and states. On what would be the GST rate, Jaitley said the GST Council, which will comprise representatives of the Centre and states, will take a view and “draw a balance” taking into account the revenue requirements and the need to keep the tax rates low.
Talking about the roadmap for the GST rollout, Revenue Secretary Hasmukh Adhia said the government is looking at April 1, 2017 as the target date for implementation. “Within the next 30 days, we expect 50 per cent of the states -- about 16 -- to approve the Constitution Amendment Bill,” he said. The Bill, which was cleared by the Rajya Sabha last night, is likely to be approved by the Lok Sabha this week after incorporating changes made by the Upper House.Jaitley said the government is working to roll out the GST as “reasonably quick” as possible. “It is always good to set a stiff target,” Jaitley said when asked about the April 2017 deadline. As regards the impact of GST rollout on inflation, Jaitley said over the years, the tax rates will come down and hence the prices of many commodities will also decline.
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