A large section of India Inc wants to keep the standard GST rate below 20%, and services like telecom, banking, healthcare and railways to be included in the ‘merit’ list to keep inflation in check.
“No tax reform can succeed unless adequate revenue generation is assured to both the Centre and states. Likewise, in the case of GST, the Revenue Neutral Rate (RNR) should be worked out, taking into account the tax buoyancy and all out efforts must be made in this direction,” Assocham Secretary General D S Rawat said.
The RNR is the rate at which there will be no revenue loss to the Centre and states in the Goods and Services Tax (GST) regime.
Besides, doing away of Octroi and Entry tax at the inter- state borders would bring in a huge amount of operational efficiencies that in turn should have a positive implication for the transaction cost, the chamber said.
“Our assessment shows that the industry can live with GST benchmark rate of a band of 17-20%. Anything above that will be counterproductive and lead to inflation, especially on the side of services,” Rawat said.
“Besides, the most important stakeholders in the entire process of reforms are the people of India, who should savour the pudding (as its proof)... and then will surely support the entire gamut of economic reforms.”
While it is true that the states have concerns over the possible revenue loss, but once tax buoyancy takes place due to GDP growth, operational efficiency and more people getting into the mainstream, it is going to be a win-win situation even for the states, the chamber said.
It further said the work needs to be done on a war footing in the next seven months to fix each and every problem that may crop up.
As far as possible, no sector of the economy should feel GST as a problem, instead it should be welcomed as a major solution to the complexities in the Indian paradigm, it noted.