GST to cut inflation by 2% in India: Adhia

Wednesday 24th May 2017 05:50 EDT
 
 

India's revenue secretary Hasmukh Adhia said inflation would fall by 2 per cent on implementation of the Goods and Services Tax, and would create buoyancy in the economy. The government is all set to launch a massive awareness campaign to educate consumers about GST, to make sure they are not cheated by traders in the name of the new tax. Adhia said the GST Council would meet next week to decide on tax rates of contentious items like gold, bidi, and biscuits.

The Council assigned tax rates to over 500 services and 1,200 goods by setting them in five broad rates of 5, 12, 18, and 28 per cent. Adhia said the rates have been so fixed that incidence of taxation has come down in many, and remained at the same level as now in most of the remaining goods and services. He said, “I don't think inflation will at all go up because of GST. We have take special care to ensure inflation does not go up. Our internal estimate is that after the rates are decided, inflation should come down by 2 per cent.” The current indirect tax regime suffers from significant cascading, leading to higher cost of goods and services, a free flow of credits across transactions under the GST framework will bring down the tax cost for businesses. GST will be a single nation-wide sales tax replacing a string of central and state levies.

“That is how we have managed to keep our inflation basket under control,” Adhia said. He stated that the all new tax will create buoyancy in the economy through better compliance and ease of doing business. “I wouldn't say anything is pending, but I would say the government has to reach out to the trade and industry and also the machinery of explaining the GST procedures in town-hall meetings. We need to accelerate this.” He added, “Because we have taken care to ensure the average tax incidence on commodities does not go up... There may be some traders who will try to tell consumers that under the changed GST rates, they have to pay more. We have to educate them.”

Adhia stressed on the fact that consumers need not be charged more in all cases even though the headline rate may go up as input tax credit or setting off the tax paid on raw material is available. “We need a lot of consumer education for that.” The GST law provides for an anti-profiteering mechanism that will ensure industries that have got relief by way of lower taxes actually pass on the benefit to consumers. “We will try to set it up as early as possible or we will try to identify an agency which will do it. We are working on it.”


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