GST – Report on Revenue Neutral Rate and Structure of Rates
We had earlier presented the brief gist of the report of the Committee headed by Chief Economic Advisor Arvind Subramanian on the Revenue Neutral Rate and Structure of Rates for the Goods and Services Tax (GST.
The report is now made available by the Ministry of Finance.
Click to download the report on Revenue Neutral Rate and Structure of Rates
Date : 10th December, 2015.
GST Panel submits recommendation on tax rates
The Committee headed by Chief Economic Advisor Arvind Subramanian has submitted to the Finance Ministry its report on the suggested rates of tax.
The Committee has suggested dropping additional one per cent tax on inter-state sales over and above the Goods and Services Tax (GST) rate but did not favour putting the rate of GST, in the Constitutional Amendment Bill.
The Summary of Recommended Rate Options (in percent)
|
RNR |
"Low" rate (goods) | "Standard" rate (goods and services) | "High/Demerit" rate or Non-GST excise (goods) | ||
| Rate on precious metals | Other goods | ||||
| Preferred | 15 | 6 | 12 | 16.9 |
40 |
| 4 | 12 | 17.3 | |||
| 2 | 12 | 17.7 | |||
| Alternative | 15.5 | 6 | 12 | 18.0 |
40 |
| 4 | 12 | 18.4 | |||
| 2 | 12 | 18.9 | |||
All rates are the sum of rates at center and states.
The report has presented different scenarios projecting
a) Standard Rate of 16.9% to 17.7% depending on the of rate of tax on precious metals between 2% to 6%, if the revenue neutral rate is 15%
b) Standard Rate of 18% to 18.9% depending on the of rate of tax on precious metals between 2% to 6%, if the revenue neutral rate is 15.5%.
In both the scenarios the rate of tax for essential goods is recommended at 12%.
The complete report is not yet made available in the public domain. We shall carry a detailed analysis as and when the report is available.
Click the link below to read the press release on the recommendations, that details the extract from the executive summary of the report.
Press Release of report on GST Rates
GST Council to take the final call
It is to be noted that the report is only a recommendation. While it is likely that the Central Government may accept the recommendation as it also satisfies the demand of Congress Party that the combined CGST and SGST rates should not exceed 18%.
We are skeptical of the State Governments agreeing to the standard SGST rate of 9% (assuming CGST and SGST to be equal). Since the revenue loss would be compensated for the initial 5 years, it is possible that the Central Government would convince the GST Council to accept the combined Standard Rate of 18% or possibly agree to a Standard Rate of 20%, with higher SGST Rates.
Date : 5th December, 2015.