Asian Development Bank President Takehiko Nakao on Thursday said the roll-out of the Goods and Services Tax regime on July 1 was an important achievement of the National Democratic Alliance government, but said that it could pose challenges because of factors such as its multiple tax rates, The Hindu reported on Friday. Nakao made the comments while speaking to reporters after meeting Finance Minister Arun Jaitley in New Delhi.
“There are many different views about GST because of so many tax rates, for instance,” he said. “So its application is a very important challenge. From my experiences in Japan, when we introduce a new tax, especially such an advanced instrument of taxation like GST, sometimes businesses have to think about pricing based on the new tax burden.”
Arriving at an effective pricing strategy in the GST era would be the biggest challenge for businesses, Nakao asserted. The dual tax enforcement structure India has adopted – whereby both states and the Centre are in charge of enforcement – could be problematic too, he said.
However, Nakao insisted that the biggest benefit of GST would be the integration of the Indian economy into a single market. The ADB chief, while praising the reforms undertaken by the NDA government in several areas, said India must put more energy into reforms of its labour and land acquisition laws as well as Foreign Direct Investment, so that its economy can grow faster.
Nakao stated that India must take advantage of its working age population by inviting more FDI.
ADB chief proposes bigger loan for India
On Thursday, Nakao proposed an additional loan to India of $10 billion (Rs 648 billion), reported Business Standard. Half the loan amount would be for the development of the East Coast Economic Corridor.
The ADB had in 2016 approved a $631-million (Rs 40.9 billion) loan for the Vishakhapatnam-Chennai section of the corridor. Now, it intends to focus on less developed states, including Uttar Pradesh, Bihar, Jharkhand, Odisha, and Chhattisgarh.