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Country should eventually have a GST which will have only slabs of zero: Jaitley

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New Delhi: Speaking about the Goods and Services Tax, Finance Minister Arun Jaitley said that the country should eventually have a GST which will have only slabs of zero.

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“A future road map could well be to work towards a single standard rate instead of two standard rates of 12% and 18%,” the finance minister said in a Facebook post on Monday titled “18 months of GST”.

“It could be a rate at some mid-point between the two. Obviously, this will take some reasonable time when the tax (revenue) will rise significantly. The country should eventually have a GST which will have only slabs of zero, 5% and standard rate with luxury and sin goods as an exception.”

Lowering the tax rate on cement from 28% to a lower slab was, however, a priority, Jaitley said.

According to Jaitley, under the value-added tax (VAT) regime the effective standard rate of taxation was 31%, besides the fact that the same commodity was taxed differently across the country.

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The finance minister’s statement is in response to criticism from the opposition Congress that the new indirect tax with four rates—5%, 12%, 18% and 28%, besides a list of exempted items and cess on certain products—is a complex tax system and that it should have been capped at 18%.

GST was implemented on 1 July 2017 as a four-slab system as the Union and state governments were unsure about the revenue impact. The 13th Finance Commission chaired by former finance secretary Vijay Kelkar had proposed a single rate of 12%.

Singapore has adopted a single GST rate of 7% and the UK has two rates—5% and 20%.

Experts say that most countries have one standard rate and one lower rate for GST and the idea of converging the 12% and 18% rates is welcome.

“Chief economic adviser (Arvind Subramanian) had in the past suggested a revenue-neutral rate between 15% and 16%. Hence, the intention to move to that rate would be very welcome,” said M.S. Mani, partner, Deloitte India.

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