The government might end up combining the GST rate of 12 and 18 percent while reserving the 28 percent tax slab for demerit goods, said the chief economic adviser Arvind Subramanian.
Though India might never have a single GST rate, with the flow of time there would be a “poor man’s” rate (0 percent to 5 percent), a “core” rate (combination of 12 percent and 18 percent) and the demerit rate (28 percent), said Mr Subramanian.
I think we are certainly heading in the right direction (on the GST structure),” Mr Subramanian said.
“I never liked the 28 per cent slab, which I think has created some of the transitional challenges. I think we are very close to making 28 per cent just for demerit goods… 0 per cent and 5 per cent has quite a lot of the tax base and there I think we will not be able to make that much progress as we have to protect the poor. But the 12 per cent and 18 per cent, at some point, can be combined in the foreseeable future into one rate,” the chief economic adviser added while charting out the structure.
“In India, we will never get one slab. We have too much of a socialist mindset and for a good reason. Last time, land and real estate were on the agenda of the GST Council, but we couldn’t discuss it. I think that will happen sooner rather than later. I want electricity to come in very early because it will enhance competitiveness and help meet the ‘Make in India’ objectives,” he said.
“I think broadly on GST we are not doing badly. We are doing a growth of 12 per cent-13 per cent. Broadly, we are in line,” he said while adding that the states will not witness a deficit.
“At the risk of sounding a little over-enthusiastic, I think we would be pleasantly surprised about how much the base can expand. If you look at the number of registrants or if you look at implied tax base in the next six months we are going to look at a bigger tax base than we thought before starting this enterprise,” he added.
“There are parts of political class which like a strong rupee. I think that’s something that’s true and that’s something we need to deal with,” Mr Subramanian said.