Goods & Services Tax bigger than second generation reforms
September, 25th 2012
The introduction of the goods and services tax (GST) is likely to be a reality soon, with some opposing States coming around, according to Adi Godrej, Chairman of the Godrej Group.
GST will be the biggest reform after 1991. As with most things in this country, economic reform is held up by political differences, but there is good progress these days, he said. Stating that politics has always interfered with economic decisions, Godrej added, Peoples understanding of growth is still poor. The idea is that under a socialist regime, no country has done well. So, neither will we. This has to change.
GSTs implementation alone would add 1.5-2 percentage point to Indias GDP growth. It will provide a tremendous stimulus and can solve several issues like inflation and fiscal deficit, he said.
Maintaining that there were few problems to GSTs implementation and that political differences are delaying the whole process, Godrej said, There is a lot of bargaining going on. It is not only for the Union Government to implement it, but States must address the macro economic problems.
He pointed out that tax evasion would become difficult once GST is implemented.
GST will help exports. Tax refunds will be available and it will be across the board. It will boost the economys growth rate, he added.
Emphasising the role of States in implementing the next generation of reforms, Godrej, who is also the President of the Confederation of Indian Industry (CII), said he had met Yashwant Sinha of the BJP to apprise him of the issue.
We are working to build consensus at both the States level and the Centre for their implementation. Negotiations are going on. I have had a discussion with Bihars Finance Minister Sushil Modi. We have taken the message across to Gujarat, Bihar and Uttar Pradesh, and even some opposing States. Politics should not come in the way of economic reforms, he said.
Stating that the implementation of GST is bound to be a game-changer for India and we have impressed this upon the States, Godrej added, GST is even bigger than the second generation reforms and would propel the economy to new heights.
Godrej added that States needed to be convinced about the benefits of GST so that it is introduced quickly. Peoples mindset can only change with discussions and debates, he added.