GST will help lower inflation, claims Hasmukh Adhia

New Delhi: Revenue secretary Hasmukh Adhia on Tuesday said that GST will lead in fall in inflation as most of the goods will see their tax incidence coming down when the new taxation rolls out from July 1.

The secretary said that a product on which currently standard rate of excise duty is 12.5 per cent and standard rate of VAT is 14 per cent, sees various other cascading taxes like Central sale tax, entry tax and some component of service tax. These all taxes take the total incidence of tax on such a good to 32 per cent. He said that under GST such a product will be taxed at 28 per cent as all other taxes will be merged into one tax.

“May I tell you that 60 per cent of the income of Centre and state is coming from this level. So there will be reduction (in prices) in all these items. Consumers will benefit in most cases,” said Mr Adhia.

He said that under GST, Central sales taxes which generates around Rs 60,000 crore in taxation in a year for states will be abolished which will mean that there is no cascading impact of taxation on consumer.

The secretary said even though under GST services will be taxed at 18 per cent from current 15 percent there is unlikely to be any increase in total tax incidence. This the secretary said is because under GST  input credit will available for taxes paid on goods consumed while providing services, which is not the case currently.

“There will be actually not much net increase in services tax also. There may be marginal in some case,” said Mr Adhia.

He said as far as banks or insurance firms are concerned their purchase of goods is big and they will get tax credit under GST so it will become 15 per cent.