GST benefits will emerge shortly, says Shaktikanta Das

The benefit of Goods and Services Tax (GST) will become apparent in a couple months as manufacturers and businessmen realise the advantage of input tax credit, assured Shaktikanta Das, former Economic Affairs Secretary.

The shift to the new tax regime in July 1 has been accomplished without major issues, though there could be some initial problems, he said.

GST will deliver long-term benefits such as enhanced efficiency of businesses, better logistics and prevent cascading taxes, all of which will help bring down the cost of production and improve competitiveness.

In addition, compliance will improve as it becomes difficult to keep a part of the business outside the purview of GST and will help widen the tax net, he added.

While economists and experts say GST will add 1-1.5 per cent to GDP growth, the government itself has not quantified it. But it is clear that GST will contribute to economic growth, he said, addressing participants at ‘State of India’s Economy — the Way Forward’, an event organised by the Chennai International Centre.

Interacting at the event with Aarati Krishnan, Consultant Journalist, BusinessLine , Das said that with GST, in tandem with the demonetisation move of last November, the economy will emerge more robust in a couple of years.

Demonetisation has helped bring a part of the black money into the system and established a clear trail, effectively stopped the balance from coming back into circulation and, importantly, tackling the counterfeit currency that funded terrorism, he observed. The note-ban had been discussed ahead of Budget 2016, but the government realised more time would be needed and had held it off, he recalled.

With such positive, disruptive measures, economic growth is bound to happen, he said. In the current year it could be around 7.5 per cent, in the coming year 8 per cent and in the next, close to 9 per cent, he felt.

There are some challenges in encouraging private investments, as bank funding is linked to resolving the stressed assets issue, he said. But ECB and Masala Bonds, the rupee denominated bonds, are happening, with RBI having cleared over ₹40,000 crore and more than half having come in. Supply chain management in agriculture also needs to be addressed, he said.

“The Indian economy is undergoing a churn and, in two-three years, we will see a robust economy,” Das added.

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