Manufacturing will get more competitive due to the emergence of a national market as against the present fragmented one.
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This Bill proposes to benefit nearly every party involved, businesses will benefit with easy compliance and uniformity of tax rates and structures.
Subramanian said a relatively low rate reduces the chances of it being inflationary and improves compliance while a high tax rate raises chances of tax avoidance.
As regards the compensation which needs to be paid by the Centre to the states, Adhia said the amount can only be quantified after the GST rate is decided.
However, the clause 10 goes against the decision of the Empowered Committee of 2014 which states the residual amount in the IGST account (The Integrated Goods and Services Tax) shall be shared with the states as per Finance Commission Formula, he said. “Parliament appeared to be PM-mukt”, he said, noting that Mr Modi was not present in the Lok Sabha when the GST bill was passed past year.
However, he sought clarity on the continuance of existing exemptions especially those linked to investment made both at the Centre and state levels. It, however, said that GST could raise inflation if the cuts to prices from the removal of various taxes that the indirect tax regime will replace are not fully passed on, while the implementation is fully reflected in retail prices.
“Prior to GST, companies in India faced multiple level tax structures, which made it hard for them to conduct business competitively”, Arun Singh, lead economist at Dun & Bradstreet India said.
Roll out of GST may figure in the deliberations as Shah believes that its passage in Parliament will be an important achievement and party-ruled state governments should do their best to make it a success, the sources said. “It will bring uniform tax rate throughout country and will help in seamless movement of goods and services across the States”, said the Finance Minister.
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He also said the GST passed by the Upper House was only a framework and more discussions were needed on several matters including fixing of tax rates.
