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.
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.
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.
Subscribe to Moneycontrol Pro at ₹499 for the first year. Use code PRO499. Limited period offer. *T&C apply
For the second time in as many weeks, the Centre and states today failed to reach a consensus on who will control which set of assessees under GST, a disagreement that threatens to derail the April 1 target for rollout of the new indirect tax regime.
A zero tax on daily necessities as well as lower rate of 5 percent for items of mass consumption will make the new Goods and Services Tax regime, to be rolled out from April next year, less regressive, tax experts said.
Already, the graph of employment generation under the Narendra Modi government is on the declining course; the economy may not be able to take another round of job losses