GST bill highlights: India’s proposed sales tax edged closer to approval on Friday after a government-appointed panel (CEA Arvind Subramanian panel) backed the lower rate and simpler structure that the opposition Congress party had demanded. Aimed at creating a customs union for India’s 1.2 billion people, the Goods and Service Tax (GST) is the biggest revenue shake-up since Independence from Britain in 1947.
Supporters of GST bill say it will add up to two percentage points to economic growth by replacing multiple federal and state tax levies, a chaotic structure that inflates costs for businesses. The measure tops Prime Minister Narendra Modi’s legislative agenda. The Congress party wants Narendra Modi to cap the rate of GST at under 20 percent, scrap a proposed state levy and create an independent mechanism to resolve disputes on revenue sharing between states.
In what appears to be backing for its position, a government-appointed panel suggested a standard GST rate of 17-18 percent. It also backed scrapping a proposed 1 percent additional levy by states on the cross-border transport of goods.
“The report will certainly put pressure on the government to accept the opposition’s demand,” said Mahesh Jaising, a partner at tax consultancy BMR & Associates LLP.
While Narendra Modi’s Bharatiya Janata Party (BJP) enjoys the biggest majority in 30 years in the lower house of parliament, it is in a minority in the upper house and is dependent on Sonia Gandhi’s Congress to pass bills.
Also read: What is GST bill: All you ever wanted to know in 11 points
Following are the top 7 highlights of recommendations of the Committee on Revenue Neutral Rate (RNR) on GST headed by Chief Economic (CEA) Adviser Arvind Subramanian:
GST bill highlights:
1. Revenue Neutral Rate proposed at 15-15.5 pc
2. Standard Rate of GST proposed to range 17-18%
3. Lowest rate of GST proposed at 12 pct and max rate at 40%
4. Remove 1 per cent additional tax
5. GST rate be not included in the Constitution Bill
6. Include petroleum and alcohol in GST regime
7. Impact on inflation expected to be minimal
Also read: GST bill gets NCP, BJD nod; but Congress demands changes
(With inputs from Reuters)