Goods & Services Tax (GST) in IndiaStandard GST Rates @17-18% and GST Revenue Neutral Rate @ 15-15.5%- CEA Led Panel Recommends to FM

Finally ,its official that today  the chief economic advisor, Mr Arvind Subramanian, has submitted his report on the goods and services tax (GST) to Mr Arun Jaitley,Finance Minister  of India . .

The most amazing thing in this report is recommendation of 15-15.5% GST Revenue Neutral Rate (RNR)  which  is much below than the minimum expectation of 18% GST RNR . This is going to be  a very welcome step amongst the trade of India .

It should be understood that GST is going to create a uniform market in India  beside  strengthening  the country’s tax institutions. In order to arrive at such GST RNR , the panel had explored 3 three different methods to calculate the crucial revenue-neutral rate.Mr Arvind Subramanian claimed that this was a technical exercise and we took into account methods using direct taxes, indirect taxes and an approach suggested by the NIPFP.

It is pertinent to note that RNR is a rate  at which there will be no loss to state and central governments.

The committee decided to provide a range for the GST rate for various products and services:

1. Lowest GST Rates @ 12%

 2.Standard GST rates @ 17-18 %

Maximum products and services to fall under this rate.

 3.Higher GST Rates @ 40 % Cigarettes, luxury cars and beverages may attract higher GST rate.

 AMLEGALS , a leading indirect tax law firm (viz. amlegals.com) had anticipated the same slabs on yesterday  and since  2014 , it had published various research articles and claimed that the GST rates should be anything around 18 % to 24% and finally it has been also suggested by CEA led committee. ( please refer one of such an article of mine in May 2015 on http://taxguru.in/goods-and-service-tax/goods-service-tax-gst-time-deadlock.html )  

Exclusions

The following sectors have been excluded while calculating the tax rate  :

1. Real estate,

2. Electricity

3. Alcohol and

4. petroleum products

Since ,some states have expressed reservations over giving up tax control on the lucrative items but the CEA panel suggested these be brought under the GST ambit soon.

The CEA led Committee has also suggested  for dilution of 1% inter state levy of additional tax .

 by Anandaday Mishra, Founder Advocate , AMLEGALS 

( The author is one of the leading litigation and advisory advocate. He has published various research papers on GST . He handles cases in Tribunals  & High Courts of India. He can be contacted on anand@amlegals.com .For more, please refer www.amlegals.com )