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GST to make goods and services more competitive in domestic and international markets: Pranab Mukherjee
May, 24th 2012

The Union Finance Minister, Pranab Mukherjee said that the primary benefit of the Goods and Services Tax (GST), when introduced, would be the removal of cascading effect of taxes which acts like a hidden cost and makes goods and services uncompetitive both in domestic and international markets.

He said GST would check leakage of revenue and the States should be able to realize tax revenues commensurate to consumption of goods and services within their territory, thereby providing a stable source of tax revenue and would play a very vital role in sewing India together into one common market. The FM added that for the consumer, the biggest advantage of the GST would be its transparent character as well as the reduction in the overall tax burden on goods which is currently in the range of about 25-30%.

Mr Mukherjee was addressing the Second Meeting of the Consultative Committee attached to the Ministry of Finance during the current year here yesterday. The subject of the meeting was "GST-The Way Forward". The meeting was also attended by the Ministers of State for Finance S.S. Palanimanickam, Minister of State for Finance Namo Narain Meena. The Finance Minister emphasized that there are several factors that make the current situation conducive to the introduction of GST in India. He said that studies have shown that the introduction of GST would act like a stimulus and instantly spur the rate of growth of the economy.

All the States have successfully switched over from the erstwhile Sales Tax system to the State Value Added Tax (VAT). He said that with the implementation of the recommendations of the 13th Finance Commission, the two items in respect of which the States were prevented from levying VAT viz., textiles and sugar have also been omitted from the AED schedule. The Finance Minister said that ever since the introduction of VAT, almost all the States have witnessed a spur in the rate of growth of their tax revenues.

He also added that as far as central taxes are concerned, the integration of central excise duty and service tax i.e., the taxation of goods and services is almost complete. Besides, the movement to a negative list of services would bring us to a near GST situation in the taxation of services, the Minister added. Mr Mukherjee said that ground has been prepared and the leap to GST is only logical step from here. The FM further said that the substantial and commendable efforts have been already put in by the Empowered Committee of State Finance Ministers in providing flesh and blood to the blueprint of GST suited to the Indian context.

The first discussion paper on the subject was released by the Committee in November 2009, he said. Based on this conception, the Centre has already introduced a Constitution Amendment Bill in the Lok Sabha in February 2011--the first step in the legal process that would culminate into the GST. The FM hoped that the Standing Committee on Finance would soon give its report on the Bill so that the process of legislation in this direction can move forward.

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