The curious case of GDP and GST

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A Parliamentary panel which went into the long-pending Goods and Services Tax (GST) Bill, the biggest indirect reform that seeks to create a uniform tax structure for the entire country that was passed this week, had indicated that the delay would cost the country the growth in its GDP.

Also called the Constitution (122nd Amendment) bill, 2014, the GST Bill was passed in the Rajya Sabha unanimously with only the AIADMK walking out. The government is aiming to implement the Bill in the next financial year starting April 1, 2017.

The bill, which simplifies tax structure into Central, State and Inter-state taxes, hopes to bring down the current complex rates from around 35 percent to around 18-19 percent.
The panel, while recommending the passage of the bill, had remarked that the Bill would help one to two percent of growth in India’s GDP.

“GST will create one large Indian market – realising the vision of one India. It will expand the country’s GDP by one to two percent,” says businessman and MP Rajeev Chandrasekhar, elected member of the Rajya Sabha from Karnataka, who was also on the Select Parliamentary Panel on GST.

He further added that the delay in passing the GST has cost the nation $20 billion.

It has been a long road for GST. I also had the opportunity to serve as a member of the Parliament’s Select Committee on GST and be a part of wide ranging public consultation process with various stakeholders. So it was frustrating to watch that work being tossed around the last three (Parliament) sessions, even by conservative estimates an excess of $20 billion has been the loss considering its potential one to two percent boost to the GDP.

The GST was first mooted by the Congress when the UPA was in power and the Bill was introduced in the Lok Sabha in 2010. Its been one of the longest pending bills. After the NDA came to power in May 2014, the Congress and its allies have been playing hardball as it wanted several amendments to be agreed to. The NDA government simply did not have the numbers in the Rajya Sabha for the Bill to be passed till a historic consensus was reached with all political parties a week before the current session of Parliament began.

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