NEW DELHI (Commodity Online): A rational Goods and Services Tax (GST) could increase GDP growth rate by 1.4 to 1.7 per cent with an annual revenue increase of Rs 1.2 lakh crore at current level, apex chamber ASSOCHAM said today.
According to a recent study by ASSOCHAM, The tax GDP ratio too may go up by 1.5 to 2 per cent with net revenue jumping by Rs 1.5 lakh crore a year.
While a constitutional amendment is being considered by a Parliamentary Standing Committee, next financial year (April 2012 to March 2013) is the time set for implementing GST which is a comprehensive value added tax on goods and services levied at each stage of supply chain.
“With a significant reduction in tax administration costs due to simple uniform structure, overall cost – and thus prices – of goods manufactured locally may reduce by 10 per cent,” said the chamber
Then chamber has already organised over 30 conferences on the subject in various states.
Export costs will reduce due to zero rating of central GST and state GST with annual savings in the range of Rs 48,000 crore. While imports parity with domestic goods will change due to dual GST on imports, services will cost more because of dual tax incidence.
The GST will create a single Indian common market with supply chain efficiencies and scale up the economy, said the ASSOCHAM study. There will be no distinction between goods and services with seamless input tax credit allowed throughout the supply chain.
Thus GST will be a destination-based consumption tax borne by ultimate consumer. “It is crucial for international competitiveness, revenue buoyancy and economic growth. GST will be the biggest game changer for all stakeholders – industry, trade, investors, central and state governments, and consumers.”
However, major concerns remain due to recent trends in value added tax (VAT) structure in states and central value added tax (CENVAT). While the VAT has two rate structures of 4 per cent and 12.5 per cent, six states have introduced third slab of 15 to 20 per cent.
A total of 17 states have increased standard rate ranging from 13 to 14.5 per cent. And 19 states have increased lower rate to 4.5 or 5 per cent. Tamil Nadu has linked input tax credit to output tax.
State GST on electronically transmitted inter-state services will be a major challenge if states apply different rates, according to the study. Accounting and information technology systems will also need to be aligned so that required details can be accessed to avail full input tax credit and avoid tax losses.
Under the proposed GST rate structure, all services will attract a standard rate of 16 per cent with a negative list being considered for exemption of few. There could be a lower rate of 10 to 12 per cent for specified goods like precious metals and stones.
Other goods will be taxed at a standard rate declining from 20 to 18 per cent in second year and further to 16 per cent in third year.
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