The Finance Ministry on Thursday said that all efforts are being made to roll out Goods and Services Tax (GST) Bill from 1 April, 2017, and allayed fears that it will have an impact on inflation even if the rate is kept at 20 percent.
"All efforts will be made with cooperation of every one to meet the deadline of 1 April, 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," Finance Secretary Ashok Lavasa told reporters.
Union Finance Minister Arun Jaitley also addressed the press in Delhi on Thursday after the long pending GST bill was cleared in the Rajya Sabha. "I'm happy that the inherently mature nature of politicians prevailed," said Jaitley. He also said that the biggest tax reform in India is set to increase the ease of doing business in the country as he smoothed apprehensions over price rise.
The bill was long since pending and was key to implementing many of BJPs electoral promises. However, the central government was having trouble getting the Opposition on-board on the issue.
Commenting on the BJP government's feat of finally achieving consensus, Jaitley said, "On most issues we were very accommodating, but without compromising on the fundamentals of the GST bill."
Intent on keeping to the deadline of 1 April 2017, Jaitley also said that the amended bill will now go to the State Assemblies but it is for them to decide whether they want to see it through in the ongoing monsoon session or if they will hold a special session to discuss it.
Touted to be the biggest tax reform since Independence, the Rajya Sabha last night approved the 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 percent (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 CNBC TV18.
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 percent 'standard' rate for bulk of goods and services while recommending 12 per cent for 'low rate goods' and 40 percent for demerit goods like luxury car, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range
of 2-6 percent.
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.
Economic Affairs Secretary Shaktikanta Das in a tweet said GST will unleash a lot of energy into the Indian economy and push the 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 said.
With inputs from agencies