Benefits of GST

One thing clearly emerging from the draft proposals on the goods and services tax submitted by a panel headed by chief economic adviser Arvind Subramanian is that consumers will benefit only if retailers and manufacturers pass on the benefits of GST to consumers. The GST will replace all other taxes. This would enable the seller to bring down prices. There is no reason why retailers and manufacturers would not want to pass on the benefits as it would increase volumes. This, in turn, means more revenue for the government and higher GDP growth. The implementation of GST is expected to add between 1.5 and two per cent to GDP growth, which is why it is important for retailers and manufacturers to pass on benefits.

Services would be two to three per cent more expensive. The fine print will reveal which services would be exempt. The panel has recommended a 40 per cent tax on tobacco, aerated drinks and luxury goods. In the case of services that were taxed between two and six per cent the panel has suggested a 12 per cent tax rate. This seems a bit steep. It is now to the government to accept these recommendations, or make changes.