Subsuming fuel in GST desirable step: Debroy
Chairman of PM’S economic advisory panel says move will help manage inflation
Gireesh Chandra Prasad
NEW DELHI: Subsuming crude oil and fuels, which currently attract excise duty and valueadded taxes, into the unified national indirect tax, the GST, sooner than later is desirable in terms of tax reform and will incidentally aid in inflation management as well, Bibek Debroy, chairman of Prime Minister Narendra Modi’s Economic Advisory Council (EAC-PM) said.
Debroy’s comments come at a time the tax on fuel has become a subject of intense debate between political leaders at the central and state levels, with little consensus on a synchronized reduction to cool retail prices amid fiscal pressures.
This contrasts with the collaborative manner in which Gst-related decisions are taken at the federal tax body, the GST Council. The central government slashed excise duty levied on pettured rol and diesel sharply in May after an earlier round of reduction last November.
In an interview, Debroy said that unlike in the case of liquor, on which there never was a decision to bring the commodity into GST, the GST Council has the right to decide when to bring petroleum and products such as natural gas, jet fuel, petrol and diesel into GST. “Therefore, the sooner you bring in petroleum and related products into GST, the better it is. I personally believe everything should be in
GST,” said Debroy.
“Even if there is no issue of inflation management, from the point of view of just reforming GST, it is desirable that petroleum products are brought into GST. Incidentally, it will also help in inflation management,” explained Debroy.
Debroy expects the surge in food inflation to be temporary. India’s retail inflation had accelerated to its highest in nearly eight years in April, led by a sharper than expected spike in the price of food and manufacgoods, according to official data. It remained over the Reserve Bank of India’s upper tolerance band of 6% for the fourth month in a row. Debroy said that once food inflation eases, there may still be higher inflation rates compared to what has been around earlier because it is primarily inflation of the imported variety.
He is optimistic that India’s economic recovery is unlikely to be affected in a big way due to external factors like China’s lockdown restrictions meant to fight back the pandemic and the conflict in eastern Europe. Debroy expects a real GDP growth of around 9% in the current fiscal, aided by the recovery in the services sector and a favourable base effect.
“The real question is about FY24. I am inclined to think that we will be somewhat lucky if we have a real growth rate of 7%. I have colleagues who believe we may do 7.5% and some who believe it could be 6.5%. I am inclined to think that, if we cross 7% next year, that is a kind of optimistic scenario,” Debroy said.