GST rate likely to be under 18%: Arun Jaitley
Financial Express, December 17, 2015
Arun Jaitley on Wednesday hinted the standard goods and services
tax rate could be lower than 18%. An expert panel headed by
chief economic adviser Arvind Subramanian had recently
recommended the rate to be 17-18%, in view of the estimated
revenue-neutral rate of 15%.
The minister added
that the government was open to dropping the plan to impose a 1%
origin-based tax on interstate movement of goods, one of the
main demands of the Congress party, which is blocking the
passage of the GST Constitutional Bill in the Rajya Sabha. ?The
issue (of 1% tax) is eminently resolvable,? he said.
However, during an
interaction with industry leaders on GST here, the minister said
the other demand of constitutionalising a tax rate could not be
accommodated as tariffs are never specified in the Constitution.
Also, the Congress? demand to have a dispute resolution
mechanism within the proposed GST Council comprising central and
state finance ministers can be accepted to the extent that the
council could decide the modalities of dispute resolution but
not actually adjudicate.
Jaitley is keen to
roll out GST from next fiscal as this would add to the economic
Congress opposition to the GST Bill, he said that many express
only lip sympathy for GST without actually supporting the reform
on the floor of the House.
?Let me concede that
one of the three Congress demands is a fair arguable point. On
the 1% additional tax for two years, I told my friends, we are
willing to go back to manufacturing states and say that since we
have agreed to compensate you for full five years, this
provision can be done away with. It is a resolvable issue,? said
Jaitley. It was at the insistence of states like Gujarat and
Tamil Nadu this provision was introduced. ?After all, when
states and the Centre are surrendering sovereignty to the GST
Council, the council will decide (the rates). In any case, there
cannot be only one rate? So we can?t put a rate in the
Constitution. Since the rate is much less than 18%, the issue
gets resolved,? Jaitley said
According to the
minister, the economy, which is currently growing below its real
potential, could add another 1-1.5 percentage point to its
current growth rate ? 7.4% recorded in the second quarter ? if a
few variables turn more favourable. Jaitley said such an outcome
would depend on whether global oil price continues to be
favourable, the country gets a normal monsoon next year and
whether there would be some revival in global economic growth.
?Our real potential
is more than what we are achieving today. Our emphasis on
infrastructure spending continues to increase because oil price
remains favourable. If the next monsoon season is at least
normal and some revival of global growth starts taking place, in
addition to where we are now (of 7.4% GDP growth), I do not see
any difficulty why India cannot improve upon its growth rate by
1- 1.5 percentage point. That brings us close to our real
potential,? Jaitley told business leaders while reassuring that
the government would continue to carry out structural reforms.
Growth in the second
quarter was better than the 7% recorded in the first quarter but
was lower than the 8.4% recorded a year earlier.
The minister said he
would go ahead with reducing direct tax exemptions and gradually
bring down the highest marginal rate of corporate tax to 25%.
He also said that
there cannot be just one GST rate. ?There would be a lower rate
for commodities (for the common man), a standard rate for most
other products and a higher rate for super-luxury or ?sin?
products. So we cannot put a rate in the Constitution,? the
?Can tariffs be cast
in stone? If there is a drought and you need to raise the tax,
can you amend the Constitution? The understanding with the
states is that the council will decide (the tax rate),? said
Subramanian said GST
would be a buoyant source of revenue over the medium term. The
indirect tax reform, along with the phasing out of corporate tax
exemptions and addressing of legacy tax issues would lead to a
clean, efficient, modern and broad tax regime replacing tax
terrorism. GST represents continuity of Indian thinking over the
years and is a bipartisan effort, he said.
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