GST tax structure to bring down inflation, says CEA Arvind Subramanian

The GST Council's decision to peg the tax rate on items of mass consumption at 5 percent will bring down prices and soften inflation, Chief Economic Advisor Arvind Subramanian said today.

PTI November 03, 2016 18:53:14 IST
GST tax structure to bring down inflation, says CEA Arvind Subramanian

New Delhi: The GST Council's decision to peg the tax rate on items of mass consumption at 5 percent will bring down prices and soften inflation, Chief Economic Advisor Arvind Subramanian said today.

GST tax structure to bring down inflation says CEA Arvind Subramanian

Chief Economic Advisor Arvind Subramanian. PIB

At its meeting headed by Finance Minister Arun Jaitley, the Council agreed on a 4-tier tax structure -- 5, 12, 18 and 28 percent -- for the Goods and Services Tax (GST) which the government proposes to roll out from April 1, 2017.

It decided that items of mass consumption be taxed at 5 percent as against the centre's proposal of 6 percent. It also decided that at the higher end the tax be raised to 28 percent as against the proposed 26 percent.

The modified proposal, Subramanian told PTI, "should bring prices down. I don't think there is any fear on inflation because 6 percent goes to 5 percent. A few products move from 26 to 28 percent but many go from 26 percent to 18 percent.

"On average this should probably serve to lower inflation. If at all, the impact on inflation will be very small. Today's change should probably bring it down."

He further said that the mood at the GST Council meeting was "very good" and rate structure was decided on the basis on unanimity.

Headed by Union Finance Minister, the all powerful GST Council comprises state Finance Ministers.

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