GST will not be inflationary: Finance Minister Arun Jaitley

download.jpgSource : Economic Times 8 May 2017
TOKYO (JAPAN): Finance Minister Arun Jaitley on Monday said the goods and services tax (GST) will not have an inflationary impact since the tax on goods may actually reduce. Terming the current indirect tax structure in India as “fairly complicated”, he assured there would be no cascading impact of tax on tax.

“I don’t anticipate this to happen significantly. If at all, this maybe a transient impact…This would even in the long run bent down inflation and tax rates a little,” Jaitley said on being asked about the impact of the indirect tax reform on inflation at the investors’ roundtable organised by the Confederation of Indian Industry here.

Countries such as Canada, Australia, and New Zealand have seen one-time increase in inflation post GST implementation, which normalized in a year.

While the tax on goods is not expected to increase, that on services will go up.

“As far as services is concerned, obviously they will go up marginally and therefore, there will be some impact on this. So, goods and services may react a little differently,” Jaitley said.

The GST, which seeks to replace multiple central taxes and state taxes with a single levy, is scheduled to be introduced from July 1 but the constitution permits the government time to go up to September 15 for its roll out.

“It looks like we will be able to begin on schedule….there could be some small hiccups in the beginning but I think it’s understandable,” he said.

The finance minister chaired GST council is scheduled to finalise and approve the rates of different commodities and services on May 18-19.

The GST Council has worked a four tiered tax structure -5,12,18 and 28%- for the new indirect tax regime. Besides a cess would be levied on top of the peak rate on demerit and luxury goods.


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