Econimic Adviser, Arvind Subramanium on Wednesday spoke to Bloomberg TV India a day after debatable issues over the tax reform were negotiated.
Econimic Adviser, Arvind Subramanium on Wednesday spoke to Bloomberg TV India a day after debatable issues over the tax reform were negotiated. Subramanium informed that the states have agreed to the GST council deciding the rates, quite literally dismissing the chances of cyphering GST rates in the constituion as insisted by the opposition.This statement infers importance after the deadlock between BJP and Congress over the Constitution (One Hundred Twenty Second Amendment) Bill that creates paths for GST ascension. Subramanian did not give details of the rates that state and central governments are deciding upon.
Earlier, a panel headed by the CEA had suggested a standard rate of 17-18% for most manufactured goods, lower rate of 125 and a higher rate of 40% for demerit goods. Thus, the panel arrived at a neutral rate of 15 per cent which ensures no revenue loss due to GST roll out.
In a meeting with Finance Minister Arun Jaitley, the state finance ministers got the Centre’s assurance that the GST Bill will guarantee compensation to the states for the first five years.
Amit Mitra, chairman of the Empowered Committee of state finance ministers on GST said that it had been stated that Centre will meet the losses the states’face for the next 5 years.
While denying any specific number for the GST rate, Mitra hoped that all political parties to agree on the terms as abroad framework has been developed. He said that the tax on the common man has got be reduced as the effective tax rate would reach a new high. A prime concern among the state finance minsters was that a lower rate would hurt their revenues. Mitra assured that the wordings on the bill have been decided that would safeguard this interest. Mitra though remained silent was on if is there was an accord over the GST rate and other issues.
There are two very different options for the Empowered Committee as far as GST rates are concerned. Subramanian committee recomends that the standard rate should be at 18% whereas The National Institute of Public Finance and Policy has recommended a rate between 23% and 25%.
States also rejected the concept of revenue neutral rate. The bill has not been yet named for debate in the Upper house during July 27-29 even as the BJP hopes to build trust and agreement with states and Opposition parties soon.