Chief Economic Adviser Arvind Subramanian on Thurday said while a GST rate of close to 22 per cent will put inflationary pressure, higher rate of 27 per cent will become totally self-defeating.
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These challenges include: calculation of revenue base of Centre and states and compensation requirements, structure of GST rates, list of exemptions, forming of consensus on Model GST Bill, threshold limits, compounding limits and cross empowerment to mitigate ill-effects of dual control.
While service sectors such as Telecom, Banking and E-commerce might see marginal increase in price to end customers in the initial years of GST implementation due to increase in the tax rate but will eventually results in overall reduction in price to customers on account of tax and business efficiencies.
However, there are apprehensions that prices of services could go up. The GST Bill is now required to be placed before the Lok Sabha for approval of the amendments, pursuant to which ratification of the GST Bill by more than 50% of the States would be required.
So whatever cases would be picked up for scrutiny, the Centre and state would have the power to scrutinise both SGST and CGST filings, respectively.
He said consultations are on with regard to the threshold limit of imposition of GST. The rating agency said the short-term credit implications of GST for the sovereign will be “limited”, but in medium term it is likely to have a “positive” impact on the economy and government revenues.
Meanwhile, Suzlon Energy Ltd shares rose as much as 8.3 percent after its chairman said the company would exit debt restructuring by March 2017.
He further said the GST Council will decide on to what extent the GST rate can be brought down from the present combined excise tax rate.
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When asked about the impact GST can have on expanding GDP, he said, one has to be careful about making estimates on GDP growth at this point of time.
