On the eve of launch of the Goods and Services Tax (GST), ADB president Takehiko Nakao said its a good initiative but its implementation will remain a challenge for the government.
"There can be some transitional issues like filing of returns and its scrutiny...Another issue might be that of enforcement by state and central government tax officials. The arrangement should be very clear," he said.
The government will roll out comprehensive indirect tax reform GST on July 1.
GST has been very important achievement of the Indian government and it will integrate the country into one market, he said, while expressing apprehension that implementation would be an important challenge.
Giving details of some of the issues related to GST rollout, he said, "when you introduce a new tax regime, sometimes business have to think about pricing...There are businesses which can enjoy reduction in tax burden than previous multiple taxes...So how business adjusts to new tax arrangement is one of the important issues".
Another challenge is doing away with anomalies on input credit and output tax, he said, adding there are so many different tax rates so how to apply different tax rates on various commodities and services for output and inputs.
So, those are issues for both businesses and tax authorities, he said.
Asked about slowdown due to implementation of GST, Nakao said it is difficult to say because impact is at different level and it is multi layered.
"Besides, multi taxes are going to be rationalised which will have positive impact on businesses. Cross trade transfer would be much simpler. For some industry and business, taxes would be lowered so it is very difficult to tell the impact," he said.