E-Paper
In the second phase, focus shifts to rates
NEW DELHI: The focus of GST has now shifted to tax rates.
NEW DELHI: The focus of GST has now shifted to tax rates.
Under the new system, states and the Centre will collect identical rates of taxes on goods and services. For instance, if 18% is the GST rate on a good across the country, states and the Centre will get 9% each, called the CGST and SGST rates, respectively.
The Centre will also levy and collect the Integrated Goods and Services Tax (IGST) on interstate supply of goods and services. There has been no consensus yet on rates.
A panel under chief economic adviser Arvind Subramanian has recommended a revenue-neutral rate (RNR) of 15% to 15.5%, with a standard rate of 17% to 18% on most goods and services. RNR is the single rate at which there will be no revenue loss to the Centre and states in the GST regime.
The panel has recommended a three-tier rate structure, wherein some essential goods will be taxed at a lower rate of 12%; so-called demerit goods, including luxury cars, aerated beverages, pan masala and tobacco products at a higher 40%; and all remaining goods at a standard 17% to 18%.
The National Institute of Public Finance and Policy (NIPFP) has favoured a GST rate of 18% to 19% in case all goods are taxed at the same rate.
The 13th Finance Commission headed by former finance secretary Vijay Kelkar had suggested 18% as the possible GST rate.
According to the Bill, passed in the Lok Sabha in May 2015, the rates were to be decided by a GST council headed by the central finance minister with state finance ministers as members.
