GST rate structure issues to be resolved by next month, says Shaktikanta Das
The Hindu Business Line
By OUR BUREAU
New Delhi, October 25: The crucial rate structure for the proposed GST system — billed as the biggest ever tax reform undertaken in independent India —is expected to be firmed up by the first fortnight of next month, Economic Affairs Secretary Shaktikanta Das said.
The Centre and the States are now considering introducing four rate structure — 6 per cent, 12 per cent, 18 per cent and 26 per cent — for the proposed dual GST system.
The rate structure has been prepared on a practical basis, he said at an Assocham event here on Tuesday.
However, the controversial proposal to levy an additional cess on luxury items may stay although some States have opposed its levy, Das said.
“The matter (proposal to levy cess on certain luxury items) is under discussion in GST council,” Das said when asked about the cess.
Virtually supporting the proposal to levy cess, Das pointed out that Centre may have to go in for more borrowing to fund the fiscal deficit if the cess proposal was to be dropped.
Industry has been stoutly opposing introduction of new cess on luxury items — considered ostensibly to help fund the GST revenue loss compensation for States. Their contention is that introduction will be cascading as no set off will be available for this levy with GST payable on output items.
Das also said that the Centre does not expect the need to compensate States (for revenue loss from GST implementation) beyond three years. This is even as the Centre has assured the States that compensation would be provided for five years.
Das said the Centre was determined to implement GST from April 1 next year and that the States too are equally committed to introduce it from this date.
“GST will happen. Insolvency has happened. Both together will bring dynamism and has the potential to transform the way Indian economy functions. Our endeavour is to make India a low-cost economy through the instrumentality of GST,” he said.
The current thinking is to bring items with effective indirect tax rates (States and Centre combined) of 15-21 per cent under the 18 per cent tax rate (combined for CGST and SGST); those between 21 and 31 per cent within the ambit of 26 per cent; those items between 9 and 15 per cent under the fold of 12 per cent rate and those attracting 3-9 per cent to come under the 6 per cent rate.
Das also asserted that discussions in certain quarters that proposed GST regime will be inflationary is entirely misplaced.
He expressed confidence that the rate structure issues will get resolved in the next meeting of GST Council slated for first week of November. “I think in may be one or two more sittings, it should come to a conclusion.”
Das said the GST rate structure has been worked out in such a manner that the bulk of commodities are under the standard rate of 18 per cent and the essential items which are very important and are used by large section of people have been kept at six per cent.
He elaborated that currently central excise is at 12.5 per cent, state VAT (value added tax) is about 14-14.5 per cent and together they are about 26-27 per cent and in certain goods it is at 30 per cent.
“In GST, the peak rate is much lower than the current rate and the peak rate is only for demerit goods and for certain luxury items, while bulk of items/goods are in the 18 per cent bracket,” Das said.
“So the GST will bring down the prices. GST will facilitate logistics cost also to go down because the waiting time in the various check-posts by trucks on an average is as much as 48 hours, which makes costs of logistics higher,” he said.
“With the GST coming in, check-posts going, our logistics cost will come down, o we are looking at more moderate level of taxes.”