GST roll-out from 1 July will make goods cheaper: Jaitley

22 Mar 2017


The roll-out of the Goods and Services Tax (GST) from 1 July will create one of the world's biggest single markets and make commodities cheaper across the country even as it would make tax evasion difficult, finance minister Arun Jaitley said today.

Speaking at the 23rd Conference of the Commonwealth Auditors General, Jaitley said the new indirect tax regime will ensure seamless transfer of goods and services, while stronger information technology backbone will make evasion difficult.

Despite being one political entity, India currently is not a single economic entity as there are multiple layers of taxation that make goods costlier. GST - first proposed in 2006 - will replace at last 17 state and central levies.

''The biggest taxation reform what we are trying to implement from 1 July is Goods and Services Tax ... It will increase the volume of taxation, there is no tax on tax and therefore makes goods, commodities and services little cheaper and far more convenient,'' Jaitley said.

India has ''hugely'' been a non-tax compliant society and the government banned higher denomination notes to curb the tendency of people to deal in cash that lead to tax evasion as well as terror financing.

He said the country ranks fairly high as a non-compliant state.

''Therefore, one of the efforts of the state has been how to bring non-compliance to an end. Once the GST is introduced it will be a great check as far as evasion is concerned,'' he said, adding that the government has amended direct taxation law by bringing in curbs on cash currency.

The union cabinet this week cleared four supplementary GST legislations, which will be introduced in Parliament in the ongoing budget session.

''The laws which enable this (GST) are now before Parliament which hopefully should get cleared and once they do get cleared then by the middle of this year we hope to see the implementation as far as this law is concerned,'' Jaitley said.

''Cash component of Indian economy was exorbitantly high about 12.2 per cent of GDP and of this, 86 per cent was high denominational currency and therefore the tendency to deal excessively in cash did exist and this created its own challenges for economy,'' he said.

Cash facilitated crime, corruption, incentivised tax non-compliance and was facilitator for funding terrorism and insurgency, he said, as he defended November 8 decision of the government to demonetise 500 and 1,000 rupee notes.

''(With demonetisation) Anonymity which was attached to this high level of cash operating in market, that anonymity disappeared as it had to be deposited in bank.

''This has also increased the trend towards digitisation of economy, (will) act as disincentive to continuing to deal in a shadow or parallel economy and lead to a further integration of informal with formal economy,'' Jaitley said.

He said the reforms undertaken by the government will help India clock 7-8 per cent growth and retain the tag of fastest growing major economy in the world, but challenges remain in volatile global oil prices, reviving private sector investment and health of state-owned banks.

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