With the implementation of GST, India’s biggest ever tax overhaul, six weeks away, Revenue Secretary Hasmukh Adhia has said that inflation will come down by two percent after GST is implemented adding that the unified tax regime will create buoyancy in the economy through better compliance and ease of doing business.
“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 two percent,” Adhia said.
Adhia is hopeful of a smooth transition to the GST regime and says it will help domestic firms to become more competitive apart from streamlining the taxation for all business activities.
“Unlike in other countries, the transition to the new tax regime would be smooth here because there are multiple points of taxation in the country. Hence, the possibility of sudden spurt in inflation is remote,” he added.
Adhia warned that the industry should not take undue advantage by creating arbitrage before GST rollout on July 1.
“Because we have taken care to ensure the average tax incidence on commodities does not go up. There may be some traders who will try to tell consumers that under the changed GST rates, they will have to pay more. We have to educate them. We need a lot of consumer education for that,” he said.
To safeguard consumer interest, the GST law provides for an anti-profiteering mechanism that will ensure industries that have got relief by way of lower taxes actually pass on the benefit to consumers.
The tax department may look into the balance sheets of companies if they have gained from GST and whether the benefits have been passed on to consumers.
The anti-profiteering provision was included in CGST law to ensure that there is a commensurate reduction in prices for the consumer if there’s a lowering of tax the rate for goods and services.
Adhia said that even if the machinery for anti-profiteering takes time to be ready after GST implementation, they will have the right to call for information of change in prices retrospectively.
“The machinery for the anti-profiteering authority may not be ready at present but any change in prices will be called into questioned,” Adhia said, adding that any fluctuations in prices will be closely monitored.
You may also like to watch:
Adhia also said that GST will give a big fillip to domestic manufacturing and the Make in India programme as it will equalise the tax treatment of both imports and domestic products. Imported goods will attract Integrated GST (IGST) for which credit can be claimed at the time of sale.
Similarly, for locally manufactured goods, a similar GST rate will be applicable and hence, there will be no advantage for the imported goods, he said. “IGST is just an interim tax or a washout tax, which is equivalent to the GST rate on a specific product,” Adhia added.