Fresh negotiations may begin next week to sort out the differences between the treasury and opposition benches and hammer out a consensus for passage of the stalemated GST Bill, according to Minister of State for Finance Jayant Sinha. He added that the government would reach out to the opposition next week to discuss the GST report prepared by an official panel headed by Chief Economic Adviser Arvind Subramanian.
The panel has recommended a range of 15 to 15.5 per cent as the revenue neutral rate of the Goods and Services Tax, setting the stage for consensus building for this important reform to get through Parliament in the winter session.In line with the administration’s conciliatory stance, the report has suggested eliminating taxes on inter-State trade, including the proposed 1 per cent additional tax under GST to help promote “Make in India by making India one”.The range for standard rates is in line with the Congress’ demand that the GST rate should be capped at 18 per cent.
The panel has also recommended other rates, with the lowest rate for goods at 12 per cent and the highest rate at 40 per cent. The highest rate is for demerit goods such as alcohol.
Economic Affairs Secretary Shaktikanta Das has said the report would also be discussed between the Centre and the Empowered Committee of State Finance Ministers. “The submission of the report is a step towards the administrative preparedness for GST,” he added.
Despite the Centre striking a conciliatory note, the Congress is not too happy with the Subramanian panel’s recommendations. MP and economist Bhalchandra Mungekar, who was also a member of the Select Committee that studied the Constitution Amendment Bill for GST, has said “We had proposed 18 per cent standard rate, which is revenue neutral for the whole country. Globally, the rate is 8-12 per cent, and for a developing economy even 18 per cent is on the higher side.”
For better revenue mobilisation and controlling tax evasion, the tax structure needs to be simplified, he said. “Such fluctuating rates, as prescribed by the government, will be arbitrary. Now there is SGST and if we give freedom to States to decide their own rates, one State will adopt one rate and another State another. So this will defeat the purpose and rationale behind a concept like the GST,” he added.
R Muralidharan, Senior Director, Deloitte in India, said the proposed standard rate will be good for the industry as this would be considerably lower than the current 25 per cent tax incidence applicable on many products. “…but the cause of concern would be the increased service tax rate of 17-18 per cent and the higher rate of 40 per cent applicable on select products,” he said.