Skip to main content

Jaitley Warns Against Too Many Exemptions in GST

KEEPING THAT BALANCE Speaking at Incredible India Global Investors' Summit, FM says the more the exemptions, the higher will be the rate

A day before the Centre and states sit down to thrash out key issues of the goods and services tax (GST), finance minister Arun Jaitley has cautioned against too many exemptions, warning it will lead to higher rates for others.

“More the exemptions, the higher will be the rate... Because when you exempt some people, you charge others a higher rate. For everybody to accept exemptions, actually would end up in a higher rate,“ Jaitley said at the Incredible India Global Investors' Summit while making a larger case against incentives and exemption. “India indefinitely cannot survive and sustain merely on regimes of incentives and exemptions,“ he said.

The GST Council, a body of the Centre and states, will meet for the first time on Thursday and Friday to decide on GST rates, exemptions, thresholds at which it will kick in, and other details of the law.

Based on the deliberation, the Centre will frame a central GST law and an inter-state GST law, both of which will be tabled in Parliament at the earliest after stakeholder consultations.

The government is keen to roll out this tax from April 1, 2017.

The government is looking at a moderate GST rate that is non-inflationary , but the rate would depend on how many goods are exempt from the tax, what are taxed at low rate and what at sin rate.

A committee headed by chief economic advisor Arvind Subramanian has suggested a revenue neutral rate (RNR), rate at which there is no loss of tax for the system as a whole, of 15-15%. This would translate into a standard rate of 16.9% to 18.9% for most goods with a higher rate of 40% on sin goods, a low rate of 12% and 2-6% on bullion. The committee said 18% rate will not be inflationa ry but prices would rise beyond that.The GST

GST COUNCIL

GST council is a body of central and state governments created by the constitutional amendment law passed last month. It will have the power to take all decision in respect of this single tax that will replace multiple inditect taxes levied to create one national market for goods.

The Centre will have one-third vote in the council while the states would each have one vote adding up to two-third of the total vote. All decision will have to be taken by a majority of at least 75% vote.

The council will be chaired by the Union finance minister and has minister of state in charge of revenue and state finance ministers as members who will from amongst them elect a vice-chairman.

The two-day meet of the GST council is also likely to discuss issues of dual control and threshold at which the tax will apply. States are demanding that they be given the legal and administrative power for imposing tax on entities with turnover of up to Rs.1.5 crore.

The council will also decide the exemption limit for small traders.States are in favour of Rs.10 lakh annual turnover, same as that for the value added tax levied by them.Centre favours a higher limit. 

The Economic Times, New Delhi, 22 Septemeber 2016

Comments

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...

External spillovers likely to hit India's financial system: RBI report

  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...