"Can Be A Positive Surprise": Chief Economic Advisor On GST Rationalisation

The GST 2.0 - as the rationalisation of Goods and Services Tax has been dubbed -- could offset the effects of the 50 per cent US tariff on exporters. Also, the expected hit on the economy due to the rationalisation could be much less, government's Chief Economic Advisor V Anantha Nageswaran said at the NDTV Profit GST Conclave today. 

Asked about the data on the matter referred to by finance minister Nirmala Sitharam, Mr Nageswaran said a lot of work is in progress regarding that which as of now, it is difficult to quantify.

Regarding the burning question of exporters who are expecting to be hit by the 50 per cent US tariff, he said there will be cash flow support in terms of requirements, temporary forbearance measures and such. 

"Also, some support for alternative markets but those conversations are on between the finance minister and the commerce ministry," he added. 

But there will be some cushion effect, he said. "While the top line will be affected for very heavily export-oriented companies, they would have fixed obligations in terms of principal repayments etc. So you require working capital, cash flow managements. Also some support, handholding in terms of finding newer markets," he said.

There will be different levels of support, "but the good news is that we already have a template from what we did five years ago during Covid," he said. 

The more important  fact, he said, is that this "isn't as pervasive as that one was and you can target your relief at the right enterprises. both in terms of beneficiaries and duration". 

Mr Nageswaran also confirmed that the rate cut in GST could be offset by volume growth in terms of sales, as is being expected by many economists. 

It had happened earlier also, he said, giving the example of frequent cuts in income tax slabs and the relief to the middle classes. 

"You have been seeing growth in terms of direct taxes... so I think it is quite possible that given the magnitude of the cuts we have in GST and supplementing earlier what happened with direct taxes, I think it is quite possible that the hit is relatively mild if at all," he said. 

"It could even surprise us positively," he added, "and we have to focus on non-tax revenue and expenditure management".

As to when it would reflect on the GDP figures, he said it could be the third quarter GDP numbers, but pointed out that it would be difficult to attribute it directly to this.