Skip to main content

12 and 18 percent GST Slabs may be Merged and 28 percent for Demerit Goods Says CEA

12 and 18 percent GST Slabs may be Merged and 28 percent for Demerit Goods Says CEA
Land, realty and natural gas could soon come under GST; tax mop-up in line with expectations

The government may combine the 12% and 18% slabs for goods and services tax (GST) into one in the near future and reserve the 28% rate only for demerit goods, said chief economic adviser Arvind Subramanian.While India will never move to a single GST rate, over time there would be a “poor man’s” rate (0% and 5%), a “core” rate (the 12%- 18% combination), and the demerit rate (28%), Subramanian said during the course of a 90-minute interaction at the ET office.

Cement and white goods are not demerit goods, but the government was deliberately “going slow” on those items due to revenue considerations.The chief economic adviser, who had last year proposed a revenue neutral rate of 15.5%, said GST collections were not doing badly and the government would take a call on the overall fiscal situation in a few weeks.

“I think we are certainly heading in the right direction (on the GST structure),” Subramanian said.
Tax Base Expanding
“I never liked the 28% slab, which I think has created some of the transitional challenges. I think we are very close to making 28% just for demerit goods… 0% and 5% 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% and 18%, at some point, can be combined in the foreseeable future into one rate,” the chief economic adviser said, outlining the structure.
“In India, we will never get one slab. We have too much of a socialist mindset and for a good reason,” said the IIM-Ahmedabad and Oxford-educated Subramanian, whose tenure as CEA was recently extended by a year. Subramanian said land, real estate and natural gas could soon come within the purview of GST, and added that he supported the early inclusion of electricity as well. “Last time, land and real estate were on the agenda of the GST Council, but we 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,” he said.GST collections were in line, Subramanian said, adding that everyone would be surprised by how much the tax base would expand.“I think broadly on GST we are not doing badly. We are doing a growth of 12%-13%. Broadly, we are in line,” he said and added that states would not see a shortfall.
“At the risk of sounding a little over-enthusiastic, I think we would be pleasantly surprised about how much the base can expand. If you look at the number of registrants or if you look at implied tax base in the next six months we are going to look at a bigger tax base than we thought before starting this enterprise,” he added. Responding to a question about the rupee, Subramanian agreed that there was a section of the political class that wanted a strong rupee.
“There are parts of political class which like a strong rupee. I think that’s something that’s true and that’s something we need to deal with,” he said, pointing to how the Asean economies have used the exchange rate tool to grow.He said India’s excessive focus on foreign capital has meant lesser control on exchange rate, which in turn had implications for export competitiveness.
“One of my pet peeves against all policymakers in India of all stripes is that we just seem to love foreign capital of all sorts. Every time there is a crisis we open the capital account even more and then the more you open the capital account the less able you are to control the exchange rate,” he said, adding that it is not possible to grow at 8%- plus without strong contribution from exports. “If you love foreign capital then you have to pay the price for it. There is no free lunch in this business.
The Economic Times, New Delhi, 21th November 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…