I see no increase in taxation due to GST: Rakesh Jhunjhunwala

The ace investor believes India is poised for double digit growth by 2020

Ace investor Rakesh Jhunjhunwala has no apprehensions about the Goods and Services Tax (GST). The expert doesn't expect the unorganised sectors or the consumers to be badly affected under the GST regime. He rather believes, with more digitisation and strong logistical gains, the impact of the GST on the economy will be far deeper than the tax itself. 

"With GST, there will be as many intangible gains as there appear tangible gains. I personally feel India is poised for double-digit growth, and GST is an aid to it. Even without GST we would have reached there. If you ask my personal judgment, post 2019-2020 we are poised for double digit growth," said Jhunjhunwala, Partner, Rare Enterprises, in an interview with ET Now.  CLICK HERE FOR THE FULL INTERVIEW

"The effect of GST is going to be far deeper than the tax itself, because first it will lead to digitisation, and the second, it will lead to big logistical gains because companies had to maintain warehouses in each state as they did not want to pay the central sales tax, and the lorries were stopped in lots of places," he added. 

The expert though acknowledged that there will be initial hiccups, he was quick to add that the new tax regime will lead to a forced morality and a willingness to pay taxes.

Jhunjhunwala doesn't see the net increase in taxation on account of GST.

"The rate of tax will increase in certain items, but effective tax rate will decrease because the input credits will be greater than the increase in the rate. Overall, there is going to be some reduction in taxes and not some increase," he said. 

On anti-profiteering clause, the expert was of the view that it will lead to nothing.

The Anti-Profiteering clause of Central GST Act, requires that the companies need to pass on the benefits of lower indirect tax rates (including benefits of availability of higher input tax credit) to consumers through commensurate reduction in prices of goods/services sold. 

The anti-profiteering clause is of little use as competition places a better check on prices, he said.

The ace investor also spoke about the banking sector’s non-performing assets.  

"Once a few stressed assets in the banking sector are resolved under the new bankruptcy code, it would take around 18-24 months to tackle the NPA mountain," he said.