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.
“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.
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.