GST tax structure to bring down inflation, says Subramanian

The GST Council's decision to peg the tax rate on items of mass consumption at 5 per cent will bring down prices and soften inflation, Chief Economic Advisor Arvind Subramanian said today.

At its meeting headed by Finance Minister Arun Jaitley, the Council agreed on a 4-tier tax structure -- 5, 12, 18 and 28 per cent -- for the Goods and Services Tax (GST) which the government proposes to roll out from April 1, 2017.

It decided that items of mass consumption be taxed at 5 per cent as against the centre's proposal of 6 per cent. It also decided that at the higher end the tax be raised to 28 per cent as against the proposed 26 per cent.

The modified proposal, Subramanian told PTI, "Should bring prices down. I don't think there is any fear on inflation because 6 per cent goes to 5 per cent. A few products move from 26 to 28 per cent but many go from 26 per cent to 18 per cent."

"On average this should probably serve to lower inflation. If at all, the impact on inflation will be very small. Today's change should probably bring it down."

He further said that the mood at the GST Council meeting was "very good" and rate structure was decided on the basis on unanimity.

Headed by Union Finance Minister, the all powerful GST Council comprises state Finance Ministers.