The implementation of the Goods and Services Tax (GST) is likely to result in Gross Domestic Product (GDP) increasing by 2-2.5 per cent points, Thirteenth Finance Commission Chairman Vijay Kelkar said here on Monday.
Mr. Kelkar was addressing members of the Federation of Indian Chambers of Commerce and Industry (FICCI).
He said the Finance Commission’s task force on GST was likely to submit its report in a few weeks.
Mr. Kelkar proposed the formation of a national GST Council, on the lines of the European Union model. He suggested that State finance ministers and their respective finance secretaries could be members of the council that would be headed by the Union Finance Minister.
He also favoured the formation of unified authority for Central GST and State GST to reduce transaction costs and greater convenience. Quoting from the National Council of Applied Economic Research study, Mr. Kelkar said exports could increase by 10-14 per cent as a result of the GST implementation. The net present value (NPV) of the gains resulting from the GST regime would be about $500 billion, he said. “All this requires a flawless implementation of the GST,” he remarked.
Mr. Kelkar said the GST would be a ‘dual tax’ with the Centre and the States levying the tax on a common base. All goods and services would be brought into the GST base, he said, adding that there would be no distinction between goods and services as far as the tax was concerned.
Moreover, the unified tax would subsume existing State levies into a single State GST, while Central excise, additional excise duties, service tax and cesses and surcharges levied by the Union Government would be built into the Central GST. “This would help in achieving a flawless GST,” he remarked.
Real estate deals
Mr. Kelkar said that transactions in the real estate sector be brought into the ambit of the GST. The purchase tax levied by some States was not compatible with the proposed GST, he said. “It will be a tax disaster if it continues,” he remarked. He also said that check posts at the border of two States could be ‘unified’ so that it reduced delays and transaction costs.
FICCI President Harsh Pati Singhania said his organisation would “prefer a dual GST to no GST.”