GST rollout deadline of April challenging: Rajan

Yolanda Curtis
August 10, 2016

As the government gets to completing formalities including getting half of the 29 states to ratify the amendment to the Constitution for roll out of GST, he said an outreach programme to address concerns will be started.

"This should boost business sentiment and eventually investment", said Mr Rajan after announcing his last monetary policy before he exits on September 4. As the base expands, we would not require a higher tax rate.

As far as the impact on inflation due to GST is concerned, Rajan said that it would be too early to talk about it.

"We are targeting April 1, 2017, for GST's implementation". "Other countries that have implemented the GST have seen an improvement in revenues".

He said the target has been set by a legislation and it would be incumbent on the RBI as well as the officials to see that inflation remains at 4 per cent with a margin of plus or minus 2 per cent.

RBI Deputy Governor Urjit Patel said about 55 per cent of Consumer Price Index basket will not be impacted by GST and since the cascading effect of "tax-on-tax" disappears, so the effective rate on many goods and services will come down.

Citing the example of Malaysia, which adopted similar tax, Dr Rajan said, "There was an inflationary imp-act, but it was short lived".

"A lot depends on which prices go up, which prices come down, some prices may as well come down".

"There will be challenges to implement the GST because of the number of taxes that will be subsumed and on building a consensus", Central Board of Excise and Custom Chairman Najib Shah said during a panel discussion on the GST at the event.

"Secondly, the large part of CPI basket will be outside, and the durable impact on it is likely to be limited", Patel said.

Raghuram Rajan thinks that GST's (Goods and Services Tax) benefits would be manifold for the Indian economy and has struck an optimistic note on the indirect tax reform. "RBI focused on meeting glide path of 5% CPI inflation by March 2017", he said.

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