New tax system a historic opportunity for India, says CEA on GST
August, 05th 2016
While several recommendations of his report on GST have not been adopted, chief economic adviser Arvind Subramanian is satisfied. He tells HT that in a true democracy, it is important to make adjustments. Excerpts: What will be GST’s immediate impact on GDP growth?
We have not done any such calculations. But potentially, it will help in easier movement of goods within India, compliance will improve, and boost the Make in India programme. Reducing all the existing barriers will help in pushing the overall growth rate of the country.
Do you think investments will suddenly surge?
You have to ask them (the investors). But let me tell you that there will be no sudden surge in investments, it will happen gradually. I think there was expectation that the tax reform will come through and it was more a signal of using the mandate (of the NDA government that came into power in 2014)
While in your report you have recommended that the standard rate be kept at 17-19%, states have shown apprehensions. Your opinion.
The GST structure will have to be decided by the GST Council. Also, we must understand that there will be some apprehension, the states will be nervous about the unknown. But, at the same time what the states are saying now is not the last word.
There is fear that the implementation of the new tax structure will push inflation. Your take.
I don’t think it will have an impact on inflation. First, about 54% of the consumer price index (CPI) basket will be kept out of the GST ambit. Two, if the rate is fixed at say about 18% -- in my report we prescribed a range of rates for the standard rate between 16.9-18.9% -- there should not be any inflationary pressure.
How confident are you of rolling out GST by April 1, 2017?
It is a challenging deadline. It now depends on the states. The GST Council will have to set the rates. So there is work left on the ground.
Do you think that the GST in the current form is flawed, considering that you in your report suggested inclusion of alcohol and petroleum in the tax ambit?
I wouldn’t say that it is a flawed GST. There is no perfect system. The best should not come in the way of the good. Given that the states had apprehension on the new tax system, this is the best.