GST will cut inflation by 2%: Revenue secy

May 21, 2017 10:56

Inflation will fall by 2 per cent on implementation of the goods and services tax and create buoyancy in the economy, Revenue Secretary Hasmukh Adhia has said.

He said the all-powerful GST Council will meet next week to decide on tax rates of contentious items like gold, bidi and biscuits, just in time for its rollout from July 1.

The Council over the two days last week assigned tax rates to more than 500 services and 1,200 goods by setting them in five broad rates of 5, 12, 18 and 28 per cent.

Adhia and his team visited this picturesque hill station near Srinagar for a short break before heading back to Delhi.

The rates, he said, have been so fixed that incidence of taxation has come down in many and remained at the same level as now in most of the remaining goods and services.

"I don't think inflation will at all go up because of GST. We have taken special care to ensure inflation does not go up. Our internal estimate is that after the rates are decided, inflation should come down by 2 per cent," he said.

While the current indirect tax regime suffers from significant cascading, which leads to higher cost of goods and services, a free flow of credits across transactions under the GST framework will bring down the tax cost for businesses.

Also, taxpayers or consumers currently have to pay both the Centre and state taxes on a single sale, which adds to increased costs for businesses and consumers.

Such an increase in costs adds to the inflationary pressure. GST will be a single nation-wide sales tax replacing a string of central and state levies.

"That is how we have managed to keep our inflation basket under control," Adhia said, promising to fix any compliance issues that crop up during implementation.

The revenue secretary said GST will create buoyancy in the economy through better compliance and ease of doing business.

"I wouldn't say anything is pending, but I would say the government has to reach out to the trade and industry and also the machinery of explaining the GST procedures in townhall meetings. We need to accelerate this," he said on the task ahead. -- PTI

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