Govt may create agency to oversee pricing mechanism

 In the wake of apprehensions that the GST regime may raise inflation and affect the common man, the government may create a separate surveillance agency that will oversee pricing mechanism as goods travel from the manufacturer to consumer.

Officials at various forums have been trying to convince people that the GST regime will bring down prices of most of the commodities. But it has been noticed in many countries that traders and firms have raised prices in the garb of GST.

“There could be a separate price surveillance authority subsequently. We are looking into it,” an official said.

Services is one area which could be costlier if the standard GST rates are jacked up more than 22%, analysts believe. At present, the services tax rate is close to 15%. In case the standard GST rate is set at 22% or above, services tax rate will also move up subsequently. But in manufactured consumer goods, in the current tax regime, a consumer pays approximately 25-26% more than the cost of production due to excise duty and value added tax. If the GST rate is anywhere between 18% and 22%, basic goods will become marginally cheaper.

According to Chief Economic Adviser Arvind Subramanian’s panel report , “An RNR of anything beyond 15-15.5% will likely result in a standard rate of about 19-21%, which would make India an outlier amongst comparable emerging economies... Our recommendations would still place India at the upper end of the standard rates found across comparable countries. It is worth emphasising that the GST is intrinsically a regressive tax and the higher the rate, the greater will be the regressivity.”

The government is planning to rollout the single most powerful tax reform since independence from April 1, 2017. For that, it will need to pass two GST legislations — CGST and IGST — in the Winter session of Parliament.  The GST Council will need to arrive at a consensual standard GST rate.

Monitoring the shift

In many countries traders and firms have raised prices in the garb of GST
Services is one area that could be costlier if the standard GST rates are jacked up more than 22%
At present, the services tax rate is close to 15%