FinMin working on GST rate, says Revenue Secy

NEW DELHI: The Finance Ministry is working on a rate for the Goods and Services Tax (GST) and has indicated that a reasonable rate will be the key to its success. “Working closely on GST rates. Reasonable rates are key to its success. Passage of Bill in Parliament to take us to next activities,” Revenue Secretary Shaktikanta Das said in a tweet.

Tribune News Service

New Delhi, July 30

The Finance Ministry is working on a rate for the Goods and Services Tax (GST) and has indicated that a reasonable rate will be the key to its success.

“Working closely on GST rates. Reasonable rates are key to its success. Passage of Bill in Parliament to take us to next activities,” Revenue Secretary Shaktikanta Das said in a tweet.

The proposed GST would subsume Central indirect taxes (service tax, central excise duty etc.) and state indirect taxes (VAT, luxury tax) into a single tax.

The Union Cabinet yesterday approved amendments to the GST Bill to compensate the states for revenue loss for five years as suggested by the Rajya Sabha Select Committee.

The GST Constitution Amendment Bill would now be taken up for discussion in the Rajya Sabha. The government proposes to roll out the new indirect tax regime on April 1, 2016, but if the Bill is not passed in Parliament soon it will be difficult to implement within the deadline. Preparations for launching the GST will require many months.

After the Bill is passed, the next step will be for the Centre to prepare GST laws and a GST Council would be set up to decide on the rates and to decide on exemptions and thresholds.

The Rajya Sabha Select Committee has suggested that the GST rate should not go beyond 20% as higher rates could fuel inflation and erode the confidence of consumers.

Comparing to global examples, the GST rate ranges from 16-20%. However, there are some exceptions like Japan, Australia and Germany, where the rates are 8%, 10% and 23%, respectively.

A sub-committee of Empowered Committee of state Finance Ministers on GST had earlier suggested 27% RNR. But the rate is being reworked by the sub-committee in view of taxation of petroleum products as also the 1% additional tax which states can levy as part of the GST rollout.

While liquor has been completely kept out of the GST, petroleum products like petrol and diesel will be part of the new regime from a date to be decided by the GST Council.

Industry body Assocham said the implementation of GST would lead to a simplified tax regime and easier compliance norms. This is projected to increase GDP annually by 0.9-1.7% with an accompanying increase in tax revenue of around 0.2% of GDP. Twenty per cent reduction in logistics costs of non-bulk goods is expected due to a rationalised tax regime. This would make domestic production of goods and services more cost effective with ensuing 3.2-6.3% annual gain in exports.