Fewer GST slabs possible in the future, says CEA

Government could merge the 12% and 18% rates and slabs may be simplified to reduce the tax burden, says Arvind Subramanian.

Hyderabad : The Finance Ministry’s Chief Economic Advisor (CEA), Arvind Subramanian, on Friday, said the union government may rationalise the goods and services tax (GST) rates  going forward by merging the 12% and 18% slabs.

“Over a time the 12% and 18% rates can probably be collapsed into one rate. So over a time we will see fewer rates,” Subramanian said delivering a lecture at the ICFAI University in the southern city.

At present, there are five tax slabs under goods and services tax– 0%, 5%, 12%, 18% and 28%. Going forward, the number of items under the highest tax slab may also be reduced by keeping only luxury items and sin goods under 28%, he said. “As we get comfortable with revenues, I think we will be looking at further simplification over the next few months,” he said.

The GST Council had earlier this month rationalised GST rate structure by bringing 178 items to the 18% tax bracket from the 28% bracket.

Subramanian, however ruled out moving to a single goods and services tax rate. “We will not ever have one rate because that is too difficult to achieve,” he said.

He had earlier suggested moving to a three slab goods and services tax structure — a poor man’s rate combining 0% and 5%, a core rate combining 12% and 18% and a demerit rate of 28%. Referring to the initial glitches during the implementation of the new indirect tax regime, Subramanian said the system may take six to nine months to streamline, reports Cogencis. The government has welcomed feedback on the GST. Earlier in the month, a six-member advisory panel formed by the union government, and mandated to simplifying and rationalising the goods and services tax, had received over 700 representations on problems faced by industry over return filing, the e-way bill, input tax credit, and exports, according to media reports.

Speaking at the ICFAI event in Hyderabad, Subramanian said the goods and services tax was the most transformational fiscal reform ever implemented in the subcontinent and its core aim was to progressively move towards the white economy from the black economy.

Prime Minister Narendra Modi’s government introduced the goods and services tax, which has subsumed most indirect taxes at the central and state level, on Jul 1, 2017. The GST is a destination-based taxation system.

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