India’s goods and services tax rates will have no inflationary impact

New Delhi: Finance Minister Arun Jaitley on Wednesday tried to temper apprehension regarding inflation on goods and commodities after the roll out of the Central Goods and Services Tax (GST), saying tax rates will be kept at near current levels to ensure that there is no inflationary impact.

Introducing four bills to give effect to the Goods and Services Tax, Jaitley said preparations to roll out the new tax regime is nearing completion and the process to classify categories of commodities will start next month.The Lok Sabha on Wednesday passed the much-awaited GST Bill, Integrated GST Bill, Compensation GST Bill and Union Territory GST Bill 2017.

The aim of the GST Council is to decide everything relating to the tax structure with consensus and this is for the first time that such an arrangement has been made, based on the principle of shared sovereignty of both the centre and the state governments, he said.

“The GST Council is India’s first federal institution where sovereignty of the centre and the states in relation to indirect taxes have been pulled in together in a federal institution.

“It is incumbent on all of us to make sure that this federal institution works. The delicate balance between what the centre and states have unanimously agreed is almost a federal contract. It is a federal contract with constitutional sanction,” Jaitley said.

The basic principle to determine tax on items will be to find out the current tax components and bracket them under the nearest tax slab so that the prices do not increase, he said.

Jaitley said the four legislations will have to be passed by parliament and one by each of the state assemblies to turn India into one market with a single tax rate.

The bills introduced are the Central Goods and Services Tax Bill, 2017, the Integrated Goods and Services Tax Bill, 2017, the Goods and Services Tax (Compensation to States) Bill, 2017 and the Union Territory Goods and Services Tax Bill, 2017.

Explaining the bills, he said the Central GST or CGST will give powers to the Centre to levy tax after excise, service tax and additional customs duty are all subsumed. The Integrated GST or IGST will be a tax to be levied by the Centre on inter-state movement of goods and services.

The states will pass the State GST or SGST law that will allow them to levy sales tax after VAT and the likes are subsumed.

Besides, GST compensation law allows for imposition of cess on certain luxury goods like tobacco, high-end cars and aerated drinks to create a corpus for compensating states for any loss of revenue in the first five years of the GST rollout.