The Centre on Thursday virtually distanced itself from the report by its chief economic adviser Arvind Subramanian that the standard rate for GST be at 17-18 per cent, saying that it was based on old
The Centre on Thursday virtually distanced itself from the report by its chief economic adviser Arvind Subramanian that the standard rate for GST be at 17-18 per cent, saying that it was based on old 2013 data and new realities had to be factored in while calculating the GST rate.
Revenue secretary Hasmukh Adhia said most goods are now taxed at around 27 per cent, and cautioned the media not to consider 18 per cent as the standard rate for GST, calling it “premature”. This may indicate that the standard GST rate may be set at higher than 18 per cent.
Mr Adhia said the Centre hoped to get the approval of 16 states within 30 days, which is required for the President to notify the GST Council.
“The calculation which the CEA’s report has done and the NIPFP has done is based on the taxable base of states and the Centre as in 2013-14. Since then a lot of things have happened in states and at the Centre. We need to account for those changes in the last two years. For example, the Centre has come out with many more cesses in the last two years. The calculation doesn’t include these cesses either,” the revenue secretary added.
The Congress has been demanding an 18 per cent cap on the GST rate in the bill on the basis of the Subramanian panel report. Interestingly, Mr Subramanian had submitted his report only nine months back, in December 2015. On Thursday evening, the chief economic adviser said that while a GST rate of about 22 per cent will put inflationary pressure, a higher rate of 27 per cent will become totally self-defeating. “At 27 per cent it is totally self-defeating. Up to 18-19 per cent there will be minimal impact on inflation, and if it goes to 22 per cent there will be a few basis points increase,” Mr Subramanian warned.
Mr Adhia said 85 per cent of the Centre’s revenue comes from items that are taxed at 12.5 per cent excise duty. He said 62 per cent of VAT revenues for states come from their standard rates, that is now 14.5 per cent. “So 65-70 per cent of revenue of states and the Centre is coming from items where the total tax incidence is 27 per cent. Now to what extent you could bring (down) this 27 per cent, by accounting for efficiency gains of GST... that is for the GST Council (to look at). It is also a question of proper calculation. Unless we have done our calculations right, it will be difficult for the government to talk about any rate,” said Mr Adhia.
“In today’s newspapers most have given examples of how the prices of different items will come down (after GST). In each example, they have taken the ideal rate of 18 per cent. I will advise that these are premature calculations, particularly in items like cars,” the revenue secretary said.
