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GST Will Cause Disruption for 2-3 Months, Should Get Resolved After That: Shaktikanta Das

File photo of RBI Governor Shaktikanta Das.

File photo of RBI Governor Shaktikanta Das.

Shaktikanta Das, the former Secretary of the Economic Affairs Department in the Finance Ministry is someone who was closely involved with the formulation of the GST, right from the years when Pranab Mukherjee was the Finance Minister.

Tushar Dhara
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New Delhi: Shaktikanta Das, the former Secretary of the Economic Affairs Department in the Finance Ministry is someone who was closely involved with the formulation of the GST, right from the years when Pranab Mukherjee was the Finance Minister. In an interview with News18 he talks about the passage of the legislation and its implications for India.'

17 years, numerous consultations and constitutional amendments. What is in store for India now?

The overall impact of GST will be positive. If India needs to remain competitive and needs to grow at 9%. The earlier tax structure had become archaic because you had a plethora of taxes like VAT, service tax, entertainment tax etc. Each state was a separate island, so the process of unifying the multiplicity of taxes to a single tax is done by GST. It simplifies the tax structure and provides an enabling framework for the economy to grow.

Give us some numbers? How fast will the economy grow?

Its difficult to quantify. But the GDP will grow because a lot of the transactions which are today part of the parallel economy will come into the formal economy. Secondly, since input tax credit will be provided, it will become cheaper to manufacture goods and the economy will become more competitive. Third, the tax base is expected to widen which will yield more tax revenue to the states and central government, which can then spend more on public services like infrastructure, healthcare and education.

Will India be able to breach the 9% barrier?

I would think so. In the medium term it should be able to, in the next 3 years or so.

Government has indicated that in the first few months they will be slightly more lenient as businesses learn to comply with GST. Is this true?

The revenue department has said that since its a completely new system and initially if there are some deviations with regard to compliance and errors here and there, government will take a benign view.

How much disruption do you expect in the economy due to GST?

Initially there will some hitches and hiccups.There will be several implementation issues and challenges that come up. But I am sure the states, centre and GST council will be able to resolve them. Most of the problems should get resolved in 2-3 months time.

The GST is a bit complicated with 4 rates? Do you see the rates converging in the future?

The concern initially was to achieve a revenue neutral rate. Going forward, as the tax rate widens, there is a very good chance that after a few years the tax rates could moderate and the number of tax slabs could come down.

Will Petroleum and alcohol come under the GST net?

Petroleum will definitely come into GST because as per the Constitution they are a part of the GST. It is for the council to decide when to bring it in. As regards Alcohol, it would require a Constitutional amendment. But that will require a consensus between the Centre and the states.

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