Single GST rate not possible, reform after compliance improves - Arun Jaitley

A rationalisation of standard rates and further trimming of items in the 28 per cent slab under the Goods and Services Tax (GST) would be undertaken only after improvement in compliance levels, Finance Minister Arun Jaitley said on Tuesday.

He also said that a single rate cannot work at the moment and that there has to be a differential rate structure under GST in a country like India where there is economic disparity.

“As far as the GST is concerned…India has been significantly tax non-compliant and so the compliance standards have to be improved first. The second factor is that in India where a significant part of the population, which is either below the poverty line or is economically deprived, a single rate in India can’t work at this moment,” Jaitley said at the CII-DIPP India-Korea Business Summit.

He further said, “After we thin the 28 per cent bracket and are able to improve the compliance

 

levels itself, then the second stage of reforms will be consolidation of other rates. We have two standard rates and in the long run, I do see them merging into one. For that to happen, it will take some reasonable time when the compliance levels start moving up.”

Jaitley said luxury goods can’t be taxed at a lower rate of 5 per cent and hence, the need for differential rates. “We have a very large number of items, food items, which are taxed at zero, economically less affluent people are taxed at 5 per cent. Luxury goods can’t be charged at 5 per cent. There has to be a differential rate in a society with economic disparity like India,” he said.

Hinting at the GST returns simplification process, the finance minister said that the government is working on making compliances simpler, adding that “it’s almost in the final stages of its preparation.” He said that has to be “linked with the larger objective of moving up the compliance levels itself under GST”.

Since the finalisation of tax slabs in June last year, the GST Council has so far rationalised rates four times — June, October, November and January this year. The government had earlier flagged the low compliance rate under both direct taxes and under GST, especially for dealers under the GST’s composition scheme. Only 7 lakh out of 10 lakh registered composition dealers had filed returns for the first quarter of the GST regime.

On economic growth, Jaitley said that India has the potential to overshoot 7-8 per cent growth rate accompanied by policy changes and supportive global environment. “Most in India believe that a 7-8 percent growth rate is an absolute normal as far as India is. But the real potential of India is to beat that. And therefore with policy changes accompanied by a supportive global environment, India perhaps has the potential to achieve little more than that,” Jaitley said.

Source::: The Indian Express, dated 28/02/2018