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Goods and Service Tax: Push for Growth or Inflation?

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By Dr Martin Patrick, Chief Economist Describing the Goods and Services Tax (GST) as "a monumental tax reform", the Finance Minister of India, Arun Jaitley argues that the implementation of GST will help to add two per cent to the national GDP. He said it will benefit all segments of business, increase tax base and reduce harassment of tax payers. On the other hand, Goldman Sachs has put out estimates which show that the Modi Government’s model for the GST will not raise growth, will push up consumer prices inflation and may not result in increased tax revenue collections. What is the reality? What is GST?  GST is nothing but a hybrid version of the Value Added Tax (VAT), modified to suit the complexities of a federal system. The central taxes do not cover value addition in goods beyond the manufacturing stage, and in services only listed services are covered. On the other hand, in the case of state taxes, only sale of goods is covered. GST rectifies