Farm goods, services to be dearer; GDP to gain: GST task force

The introduction of the proposed goods and services tax (GST) would help attain higher gross domestic product (GDP) growth and pull down prices of manufactured items, but would make farm goods and services expensive, the 13th Finance Commission Task force on GST said here today.

“Prices of agricultural commodities and services are expected to rise,” said the report of the GST task force.

“The prices of agricultural goods would increase between 0.61 and 1.18 per cent, whereas the overall prices of all the manufacturing sector would decline between 1.22 and 2.53 per cent,” the report added.

Food prices have been relentlessly rising and was over 19 per cent year on year in the last week of November.

The switchover to the GST regime from the current tax system would help in better allocation of resources and a higher GDP growth.

“The existing tax system introduces myriad distortions which favour some goods and services at the expense of others. These distortions yield inefficient resource allocation and consequently, inferior GDP growth,” it said.

Citing economic think-tank NCAER’s study, prepared for the commission, the report said: “Implementation of GST across goods and services is expected... to provide gains to GDP somewhere within the range of 0.9 to 1.7 per cent.”