A day after the government asked industry to pass on the benefit of reduction in goods and services tax (GST) rates on 178 items from 28 per cent to 18 per cent to consumers, the government today said it may combine the 12 per cent and 18 per cent slabs under the GST into one in the near future.
The chief economic adviser had last year proposed a revenue-neutral rate of 15.5 per cent.
However, India is unlikely to move to a single GST rate from the present slabs of nil tax rate to 5 per cent and the core rate of between 12 per cent and 18 per cent, the central government’s economic advisor Arvind Subramanian told The Economic Times.
The government will also continue with the demerit slab rate of 28 per cent, Subramanian was quoted as saying.
However, he hinted at the possibility of GST rates on goods like cement and white goods that do not come under demerit category but are currently included in the 28 per cent slab being brought down over time.
The anomaly in the categorisation of goods is deliberate and involve revenue considerations, according to Subramanian.
Meanwhile, some recent reports suggested that the government is likely to reduce GST rate on white goods like washing machines, air-conditioners and refrigerators from the current level of 28 per cent in a bid to increase consumer demand and boost tax collection.
Subramanian said GST collections were not doing badly and that 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.
”I never liked the 28 per cent slab, which I think 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,” ET quoted the chief economic advisor as saying.
Subramanian said land, real estate and natural gas could soon come within the purview of GST, adding that he supported an early inclusion of electricity as well.
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 per cent. Broadly, we are in line,” he said and added that states would not see a shortfall.
The central government has appealed to the industry to pass on the benefit of GST rate reduction to the consumers as it is expected to encourage domestic demand and investment among others.
The GST Council at its 23rd meeting held on 10 November 2017 at Guwahati, has recommended the reduction of the GST rate from 28 per cent to 18 per cent on goods falling under 178 heads, leaving only 50 items under the GST slab rate of 28 per cent.
A large number of items have also witnessed a reduction in GST rates from 18 per cent to 12 per cent and from 12 per cent to 5 per cent. All these changes are effective from the midnight of 14 November, 2017. The benefit of reduction in the GST rate has to be passed on by the suppliers to the consumers by way of commensurate reduction in prices. The reduction in GST rates is also expected to encourage domestic demand and investment.
Vanaja N Sarna, chairperson of the Central Board of Excise and Customs (CBEC) in a letter to all major consumer goods companies pointed to the need to immediately revise the MRP on all the products in which the reduction of GST has been announced by the Council. She has also requested all to give wide publicity to the revised MRP of products.