Finance Minister seeks to build consensus on new tax regime
In a bid to bring about a political consensus for facilitating roll-out of the Goods and Services Tax (GST) during the next fiscal year, Finance Minister Pranab Mukherjee on Monday sought to highlight the benefits of the new indirect tax regime that would accrue to the Centre, the States and the consumer.
Addressing the second meeting of the consultative committee attached to his Ministry here, Mr. Mukherjee said the primary benefit of GST, when introduced, would be the removal of cascading effect of current levies which act like a hidden cost and make goods and services uncompetitive both in the domestic and international markets.
For the States, the new tax regime would check leakage as they would be able to realise tax revenues commensurate with the consumption of goods and services within their territory and a stable source of tax revenue through GST would play a very vital role in sewing India together into one common market. As for the consumer, the biggest gain would be the transparent character of the tax regime along with reduction in the overall tax burden on goods which is currently about 25-30 per cent, he said.
Speaking on the subject ‘GST – The way forward' at the meeting attended by his junior ministers and top officials of his Ministry, Mr. Mukherjee expressed the hope that the Standing Committee on Finance “would soon give its report on the [GST] Bill so that the process of legislation in this direction can move forward.”
Mr. Mukherjee said there were several factors that would make the current situation conducive to introduction of GST in the country and pointed to studies which have shown that the new tax regime would act as a stimulus and instantly spur overall economic growth, just as the roll-out of the VAT (value added tax) in lieu of sales tax has hugely benefited States by way of increased tax revenue.
As far as central taxes were concerned, the integration of central excise duty and service tax into the GST regime, Mr. Mukherjee said, was almost complete and the movement to a negative list of services “would bring us to a near GST situation in the taxation of services.” In this regard, he lauded the “substantial and commendable efforts” that have already been put in by the Empowered Committee of State Finance Ministers in providing flesh and blood to the blueprint of GST suited to the Indian context.
Participating in the discussion, most of the members of the consultative committee supported the proposal for introduction of GST and hoped that it would lead to 1.0-1.5 per cent increase in the country's GDP growth.