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How GST can make India a $2-trillion economy
Finance Minister Pranab Mukherjee has said that the successful implementation of the Goods and Services Tax (GST) can give a trillion-dollar boost to the economy, taking the total output to $2 trillion.
"The gain from GST will propel the country from $1-trillion economy to $2-trillion economy in a short span of time," he said while addressing a meeting of the industry chamber Ficci.
Mukherjee, who had proposed a three-tier structure for the new indirect tax regime on Wednesday, quoting NCAER estimates said, "Well-designed GST will see an increase of 2 to 2.5 per cent in the GDP."
GST will subsume all the indirect levies like excise, VAT, local taxes, et cetera.
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How GST can make India a $2-trillion economy
Currently, the gross domestic product, which is the sum of total goods and services produced in a year, is over $1.25 trillion (Rs 58.68 lakh crore).
The proposed GST, he told the industry captains, will provide a level playing field to domestic producers besides stimulating the economy by removing tax distortions and tax competitions.
"The successful implementation of GST will create win-win situations for Centre-state, industry and consumers," the minister added.
Mukherjee had on Wednesday proposed a three-layer GST rates to the states -- 20 per cent for goods, 16 per cent for services and 12 per cent for essential items. As per the formula, the Centre and states will share the revenue equally.
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How GST can make India a $2-trillion economy
In the first year of GST (2011-12), the peak Central GST and state GST will be 10 per cent each, he said, adding the rates can be reduced to 9 per cent in the second year.
The effort, he added, reduce the CGST and SGST at 8 per cent each for goods and as well as services. "In a phased manner, we will be able to achieve a single CGST and SGST rate for both goods and services," he said.
The Centre has already discussed the draft constitutional amendment bill with the state finance ministers, he said, adding, "we are looking forward to constructive suggestions from the empowered committee on this landmark legislation."
Referring to the empowered group under UIDAI chairman Nandan Nilekani for putting in place the IT infrastructure for GST, he said, this has helped the government in freezing "one of the critical elements for successful role out of GST".