The Government on Tuesday said GST will not lead to inflation and rather make domestic goods competitive via-a-vis imported items.
Revenue Secretary Hasmukh Adhia dismissed fears that GST implementation will lead to a spurt in prices, saying that unlike in other countries, the transition to the new tax regime would be smooth in India.
He said several countries witnessed inflation following GST rollout as they had single point taxation system. In the case of India, there are multiple points of taxation and hence the possibility of sudden spurt in inflation is remote.
“Presently, we are tapping VAT at each stage of supply chain, from manufacturer to wholesaler to retailer. We already have multiple points taxation. Under GST, we are just merging the taxes of the Centre and states. The inflation which happened in other countries was because they shifted from single point taxation to GST,” Adhia said at the GST Conclave here.
He said that once the new indirect tax regime is rolled out, the incidence of tax on imported goods would be the same as on the locally manufactured items.
The imported goods, he explained, will be subject to Integrated GST (IGST) for which credit can be claimed at the time of sale. IGST is just an interim tax or a washout tax which is equivalent to the GST rate on a specific product.
In case of locally manufactured goods, a similar GST rate will be applicable and hence, there will be no advantage for the imported goods.
The Government levies countervailing duty (CVD) and special additional duty (SAD) on imported goods to protect domestic manufacturers.
“The incidence of tax on imported goods will be equivalent to the tax paid by the local industry. This will strengthen domestic manufacturing and Make in India,” Adhia said.
Goods and services tax (GST), which is proposed to be rolled out from July 1, will unify at least 10 different central and state levies and make India a uniform market for seamless transfer of goods and services.
Adhia said as many as 71 per cent of the existing taxpayers have already migrated to the GSTN portal and the CBEC has asked field offices to organise awareness camps in towns with a population of 1 lakh or more.
Also, the department will come out with sector-wise guidance note for GST implementation.