With almost all political parties coming onboard the GST, its passage remains only sometime away.
In an interview with CNBC-TV18, Confederation of Indian Industry (CII) President talked about the impact of GST on the industry.
Below is the verbatim transcript of Naushad Forbes’s interview to Kritika Saxena on CNBC-TV18. Q: You have spoken to us several times over goods and services tax (GST) and you have indicated that you are okay with or without the 18 percent contentious GST rate being specified. From your perspective what would corporate India want as far as GST rate is concerned? A: What we have been saying is that the Arvind Subramanian committee report, as you know, has proposed a rate of between 16-18 percent. And that is a rate that we can live with in industry. We believe that that is a workable rate, which will not be inflationary. It was calculated in way such that it is revenue neutral and we end up with the benefits of an easier and more transparent and less cascading taxes -- and not really a tax system which either raises or reduces the rate of tax that is paid.
Q: So, if the rate is higher than 18 percent, say it goes up to 20 percent. What is the impact that corporate India should prepare for?
A: If it goes up to 20 percent even that is probably something that one could live with. If it goes anything beyond 20 percent then it starts becoming much more problematic and I believe the proposal now is to ring fence the rate -- not to include the rate cap in the Constitutional Amendment Bill itself but instead to ring fence the rate maybe at around 18 or 20 percent in the bill as opposed to in the Constitution.
And that is a good step forward because it will provide some certainty to industry going forward that this is the rate they can expect in the longer term.
Q: There have been multiple analyst reports that have been analysing the impact of GST on corporate India. There seems to be the expectation and people are preparing for an initial increase in inflation at least a transitionary increase in inflation till we see growth actually kicking in. How long would that transition period be then?
A: A few months. There may be a few spikes here and there that we will see as the tax incidence changes for particular products in particular markets. But that will very quickly go away. Anyone who tries to take advantage of the situation to raise prices significantly -- the best way of controlling that is through competition.
They always say the best way to control a private firm is another private firm. So, just get another private firm to actually sell at a lower price and that get the price back down for the first firm too. So, the normal competitive mechanism will sort out any issues of opportunism that firms try to take advantage of. And that is indeed what we should encourage.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
