Chief Economic Adviser Arvind Subramanian on Tuesday gave yet another hint of further restructuring of tax rates under the Goods and Services Tax or GST. The government may combine the 12 per cent and 18 per cent slabs for GST into one in the near future and reserve the 28 per cent rate only for demerit goods, Subramanian said in an exclusive conversation with the Economic Times. The CEA also made it clear that the country may never move to a single rate GST, a demand that has long been made by the grand old party- Congress. "In India, we will never get one slab. We have too much of a socialist mindset and for a good reason," the Chief Economic Advisor said.
Subramanian explained the possible tax rates that the GST Council may settle with in future. He said over time there would be three rates - poor man's rate: 0-5 per cent, a core rate: 12 -18 per cent combination and demerit rate 28 per cent. According to the report, the CEA never liked the 28 per cent slab which he thinks has created some of the transitional challenges. "I think we are very close to making 28 per cent just for demerit goods. 0 per cent and 5 per cent has quite a lot of the tax base and there I think we will not be able to make that much progress as we have to protect the poor. But the 12 per cent and 18 per cent, at some point, can be combined in the foreseeable future into one rate," the ET quoted the CEA as saying.
The Chief Economic Advisor also touched upon the some other goods like natural gas and real estate that may come under the GST. He said that the land and real estate were on the GST Council's agenda, but they couldn't discuss it. "I think that will happen sooner rather than later. I want electricity to come in very early because it will enhance competitiveness and help meet the 'Make in India' objectives," Subramanian told the ET. Earlier in the month, the Congress had lashed out at the government for including electricity, petroleum, real estate under the new tax regime. Congress spokesperson Randeep Singh Surjewala said: "If you keep electricity, petroleum, real estate out of the ambit of GST, 50 per cent of total revenue stays out of GST ambit."
The CEA's statement has come a month after Revenue Secretary Hashmukh Adhia had called for complete overhaul of GST rates. The Revenue Secretary said that there was is need for some rejig in rates. "It is possible that some items in the same chapter are divided. There is a need for harmonisation of items chapter wise and wherever we find there is a big burden on small and medium businesses and on common man, if we bring them down, there will be a better compliance," Adhia had said.
Immediately after the roll out of the new taxation system, former Finance Minister P Chidambaram had called the multiple rates under the GST - a mockery. Chidambaram said: "When we have rates like 0.25, 3, 5, 12, 18, 28 and 40, and possibly more because of the discretion vested with state governments, how can we call this a 'one nation, one tax' regime? "A single GST rate means a 'standard' rate as well as a 'standard plus' rate (on demerit goods) and a 'standard minus' rate (on merit goods)," Chidambaram added.
In the 23rd GST Council meet, the government further brought down taxes on over 200 consumer goods and considering cuts on white goods as well. Ever since the GST was rolled out, the Council has made several changes in the tax structure and is expected to bring some more products under the new tax regime.
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