The Arvind Subramanian panel on revenue-neutral rate for the proposed goods and service tax (GST) has proposed that traders below Rs 25-lakh turnover should not be covered by the new indirect tax regime and that there could be a concessional rate for those with Rs 25 lakh to Rs 1 crore turnover.
While the report, which has been released by the finance ministry on Wednesday, is silent on the concessional or compounding rate, a draft GST Act circulated by the Centre among states suggested that this could be ‘not less than 1%’.
Subramanian, the chief economic advisor (CEA) in the finance ministry, recommended a standard GST rate of 17-18% for all services and for most of the goods (with an RNR of 15%) replacing a host of indirect tax levies that would create a seamless national market. The report favoured the centre’s idea of having a Rs 25 lakh threshold for GST in contrast to the Rs 10 lakh bar that states want, but added that the threshold could go up to Rs 40 lakh.
The panel also made a strong case for removing all countervailing duty and special additional customs duty exemptions currently given to imports as these amount to negative protection for domestic producers. Keen to support the Modi administration’s Make in India campaign, the panel said,” the effective rate of excise on domestically produced non-oil goods is about 9%. The effective collection rate of CVDs should theoretically be the same but is in actual fact only about 6%. The difference not only represents the fiscal cost to the government of Rs 40,000 crore, it also represents the negative protection in favour of foreign produced goods over domestically produced goods.”