Australia imposed a 10 per cent tax on goods and services and replaced a range of existing taxes, including a wholesale sales tax (WST), debit tax, financial institutions duty, and stamp duty on shares , leases, mortgages and cheques. New Zealand also witnessed a one-off increase in inflation after GST implementation, which normalised within a year. Canada, where the GST replaced the manufacturer’s sales tax also temporarily impacted prices.Malaysia was among the countries that managed to mitigate this risk, as Ministry of Domestic Trade and Consumer Affairs intervened actively to tame the price rise, the RBI report cited.Will India see a rise in inflation following GST implementation?“The impact of GST in most countries has been little inflationary. When you get into a GST regime, the tax rates go up for some commodities and come down for others,” said DK Joshi, Director & Chief Economist, CRISIL “The impact on inflation is not merely a function of how the tax rates have moved, but a function of producer behaviour. JM Financial said the government had done well to preserve the neutrality of tax incidence across products, as it believes the twin objective of maintaining revenue neutrality and controlling inflation could be achieved.“Early announcement of rates also implies that sufficient time is available to the industry to adjust their pricing strategies while transitioning to the new regime,” it said.

Source: Economic Times May 23, 2017 13:14 UTC