Jaitley Warns Against Too Many Exemptions in GST

Jaitley Warns Against Too Many Exemptions in GST

KEEPING THAT BALANCE Speaking at Incredible India Global Investors' Summit, FM says the more the exemptions, the higher will be the rate

A day before the Centre and states sit down to thrash out key issues of the goods and services tax (GST), finance minister Arun Jaitley has cautioned against too many exemptions, warning it will lead to higher rates for others.

“More the exemptions, the higher will be the rate... Because when you exempt some people, you charge others a higher rate. For everybody to accept exemptions, actually would end up in a higher rate,“ Jaitley said at the Incredible India Global Investors' Summit while making a larger case against incentives and exemption. “India indefinitely cannot survive and sustain merely on regimes of incentives and exemptions,“ he said.

The GST Council, a body of the Centre and states, will meet for the first time on Thursday and Friday to decide on GST rates, exemptions, thresholds at which it will kick in, and other details of the law.

Based on the deliberation, the Centre will frame a central GST law and an inter-state GST law, both of which will be tabled in Parliament at the earliest after stakeholder consultations.

The government is keen to roll out this tax from April 1, 2017.

The government is looking at a moderate GST rate that is non-inflationary , but the rate would depend on how many goods are exempt from the tax, what are taxed at low rate and what at sin rate.

A committee headed by chief economic advisor Arvind Subramanian has suggested a revenue neutral rate (RNR), rate at which there is no loss of tax for the system as a whole, of 15-15%. This would translate into a standard rate of 16.9% to 18.9% for most goods with a higher rate of 40% on sin goods, a low rate of 12% and 2-6% on bullion. The committee said 18% rate will not be inflationa ry but prices would rise beyond that.The GST


GST council is a body of central and state governments created by the constitutional amendment law passed last month. It will have the power to take all decision in respect of this single tax that will replace multiple inditect taxes levied to create one national market for goods.

The Centre will have one-third vote in the council while the states would each have one vote adding up to two-third of the total vote. All decision will have to be taken by a majority of at least 75% vote.

The council will be chaired by the Union finance minister and has minister of state in charge of revenue and state finance ministers as members who will from amongst them elect a vice-chairman.

The two-day meet of the GST council is also likely to discuss issues of dual control and threshold at which the tax will apply. States are demanding that they be given the legal and administrative power for imposing tax on entities with turnover of up to Rs.1.5 crore.

The council will also decide the exemption limit for small traders.States are in favour of Rs.10 lakh annual turnover, same as that for the value added tax levied by them.Centre favours a higher limit. 

The Economic Times, New Delhi, 22 Septemeber 2016