Finance Minister Pranab Mukherjee on Thursday said successful implementation of the goods and service tax (GST) can give a trillion-dollar boost to the economy, taking the total output to $2 trillion in a short span of time.
"The gain from GST will propel the country from one-trillion dollar economy to two trillion-dollar economy in a short span of time," he said while addressing a meeting of the industry chamber Ficci.
Mukherjee, who had on Wednesday proposed a three-tier structure for the new indirect tax regime, quoting an NCAER estimates said, "well designed GST will see an increase of 2 to 2.5 per cent in the GDP." GST will subsume all the indirect levies like excise, VAT, local taxes etc.
Currently, the gross domestic product (GDP), which is the sum of total goods and services produced in a year, is over a $1 dollar (Rs 58.68 lakh crore).
The proposed GST, he told the industry captains, will provide a level playing field to domestic producers besides stimulating the economy by removing tax distortions and tax competitions.
"The successful implementation of GST will create win-win situations for Centre-state, industry and consumers," the minister added.
The Mukherjee had on Wednesday proposed a three-layer GST rates to the states--20 per cent for goods, 16 per cent for services and 12 per cent for essential items. As per the formula, the Centre and states will share the revenue equally.
In the first year of GST (2011-12), the peak Central GST and state GST will be 10 per cent each, he said, adding the rates can be reduced to 9 per cent in the second year.
The effort, he added, reduce the CGST and SGST at 8 per cent each for goods and as well as services. "In a phased manner, we will be able to achieve a single CGST and SGST rate for both goods and services," he said.
The Centre has already discussed the draft constitutional amendment bill with the state finance ministers, he said, adding, "We are looking forward to constructive suggestions from the empowered committee on this landmark legislation".
Referring to the empowered group under UIDAI chairman Nandan Nilekani for putting in place the IT infrastructure for GST, he said, this has helped the government in freezing "one of the critical elements for successful role out of GST".