Sir,
The far reaching and game changing indirect tax reforms-Goods and Services Tax has the potential to push up India’s economic growth by at least two percentage points. This means that India, which is currently the fastest growing economy at over 7.6 per cent annually will grow by 9.6 per cent or even in double-digit with a small and incremental push in other areas of reforms like labour, ease of doing business, infrastructure in the next decade.
But this push to GDP growth will not happen fully because of multiplicity of rates proposed recently by the GST council. The actual increase in GDP growth as a result of five or six GST rates will not be more than 0.5 per cent and hence it may not be a game changing tax reforms.
But the rollout of GST from April 1, 2017 will certainly reform the tax structure to some extent. It will simplify administration of indirect taxes thereby totally eliminating red tape, delays and better clarity on taxes. It will subsume all indirect taxes barring customs like excise, service tax, entry tax, central sales tax, and state-level Value added tax. Of course, some indirect taxes like excise and other duties on petrol and petroleum products, alcohol and tobacco will be outside the purview of GST at the moment. It will also bring about unified market making the country a single market as far as indirect taxes are concerned thereby reducing corruption to a great extent. One estimate suggests saving of over Rs 1.8 lakh crore due to more turnaround time for trucks and increased fuel cost due to waiting at check posts. It will also widen the indirect tax net thereby increasing revenue of both the centre and states. These advantages and reforms will still fructify with the implementation of GST even with multiplicity of rates.
Yours etc…
K R Sudhaman
New Delhi
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