Chief Economic Advisor (CEA) Arvind Subramanian has warned that allowing manufacturing states to levy one per cent additional tax on supply of goods could be harmful to the ‘Make in India’ programme.
Subramanian was speaking at a press briefing in New Delhi on Tuesday. His comments came after the government proposed additional tax as a sop to states with manufacturing interests as it looks to win over states to facilitate passage of the GST Bill, which is expected to be implemented early next year.
Many states have been against GST with concerns that it will lead to loss of revenue despite the government stating that it will reimburse states for a period of five years.
Subramanian said that the additional tax would be detrimental to interstate movement of goods; something the GST is expected to facilitate, and would lead to increase in imports, which the BJP government wants to reduce to make India more self reliant.
He also spoke in support of rate cuts apart from keeping the GST simple.
“Think about a product going to Gujarat from Tamil Nadu crossing four states, the product will embody additional tax of 4-5 per cent. That might make it easier to import to Tamil Nadu from Bangkok or wherever. The period that we have gained to re-examine GST, some of these issues need to be looked at again,” a business daily reported Subramanian as saying.
Meanwhile, in a separate speech, Finance Minister Arun Jaitley has been reported to have stated that GST would be implemented as early as January 2016.