Following the Centre's move slashing the Goods and Services Tax (GST) rates on numerous items on Saturday, Finance Minister Arun Jaitley on Friday hinted at a possible phasing out of the 28-per cent slab in near future. "Of the 1216 commodities which are used, broadly 183 are taxed at zero rate, 308 at 5 per cent, 178 at 12 per cent and 517 at 18 per cent. The 28 per cent slab is now a dying slab," Jaitley wrote in his blog on Monday.
"We are close to completing the first set of rate of rationalisation, i.e., phasing out the 28 per cent slab, except in luxury and sin goods. A future road map could well be to work towards a single standard rate instead of two standard rates of 12 per cent and 18 per cent. It could be a rate at some mid-point between the two," Jaitley stated. However, he added that this would take "some reasonable time when the tax will rise significantly". "The country should eventually have a GST which will have only slabs of zero, 5 per cent and standard rate with luxury and sin goods as an exception," he added.
Jaitley's statement comes in the backdrop of the Centre reducing tax rates on 23 goods and services, including movie tickets, TV and monitor screens and power banks, and exempted frozen and preserved vegetables on Saturday. The reduced rates are likely to come into effect from January 1, 2019, Jaitley had said.
also read
- GST collections hit Rs 1.78 lakh crore in March, second highest since roll-out
- GST enforcement body begins action against FMCG majors like ITC, Pepsico and others for tax evasion
- GST collections rise to second highest-ever at Rs 1.72 lakh crore in January
- GST officers detect over 29,000 bogus firms involved in fake ITC caims of Rs 44,000 crore
Jaitley took to the blog to elaborate on the positives of the GST regime that the Modi-led government brought in. He said that India had the worst indirect tax system in the world, with businessmen going through the excruciating procedure of meeting 17 inspectors for filing 17 returns and an equal number of assessments. "From the date of its implementation, the GST changed the situation radically. All seventeen taxes were combined into one... The interstate barriers disappeared. States were charging an entertainment tax ranging from 35 per cent to 110 per cent. This came down radically. 235 items were being charged at either 31 per cent tax or even higher. All except 10 such items were brought down immediately to 28 per cent (sic)," Jaitley explained.
Defending the failure in meeting GST revenue expectations, Jaitley said, "The comment is based on an inadequate understanding of both the targets and the revenue increase. The targets set for the State in the GST regime is unprecedently high. Even though GST commenced on 1st July, 2017 (sic), the base year for revenue increase has been calculated is 2015-16. For each year a 14 per cent increase is guaranteed. Thus, even when 18 months have not been finished since the launch of GST, on this day every State has a target of improving its revenue with three 14 per cent increases compounded annually over the base year of 2015-16. This is close to a 50 per cent being reached in the second year itself. It is almost an unachievable target".
The finance minister, who has been at the receiving end amid plunging economic growth figures and rise in unemployement rates, added, "This increase in the tax collection has to be factored keeping in mind the significant rate reduction which has taken place in the GST. The reduction in monetary terms amounts to about Rs 80,000 crores per year. Notwithstanding the substantial tax reduction, the GST collection in the first six months of this year has shown a significant improvement as compared to the first year (sic)."
