12 and 18 percent GST rates may be merged in future, says Arun Jaitley

New Delhi: In an effort to simplify the tax structure, India is working towards a standard  GST rate which could be a mid-point between 12 and 18 percent, said finance minister Arun Jaitley on Monday.

“With the GST transformation completed, we are close to completing the first set of rate of rationalisation that is 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,” wrote Mr Jaitley in a blog.

Finance minister said that the country should eventually have a GST which will have only slabs of zero, 5 per cent and standard rate (mid-point of 12 to 18 per cent) with luxury and sin goods as an exception.

Mr Jaitley said that the Congress legacy of indirect tax was 31 per cent tax. “We transiently put them in the 28 per cent slab. As the revenues kept increasing, we started bringing down the rates. Most of the commodities have seen tax reduced,” said finance minister.

He said that only cement and auto parts are items of common use which remain in the 28 per cent slab. “Our next priority will be to transfer cement into a lower slab. All other building materials have already been transferred from 28 per cent to 18 per cent and 12 per cent. The sun is setting on the 28 per cent slab,” said Mr Jaitley.

He said that of the 1,216 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.

Mr Jaitley pointed out that restaurants are being levied a tax compounded under the composition of turnover at 5 per cent.

“Assessees with turnover upto Rs 20 lakhs are exempted from tax payment. Assessees upto Rs 1 crore turnover can get a composition by paying 1 per cent tax. The composition scheme for small service tax assessees is under consideration. Cinema tickets tax between 35 per cent to 110 per cent has been brought down to 12 per cent and 18 per cent,” said Mr Jaitley.  

He said that GST has helped in controlling inflation and evasion has also come down.

Mr Jaitley said that before GST, India had the worst indirect tax system anywhere in the world.

“The rate of taxation were exorbitantly high. The standard rate of VAT and excise was 14.5 per cent and 12.5 per cent respectively. To this could be added the CST and the cascading effect of tax on tax. The standard rate thus became 31 per cent on a large number of commodities," said Mr Jaitley. He said that assessees had only two options — either to pay a high rate of tax or evade it.

• Finance minister said that the country should eventually have a GST which will have only slabs of zero, 5% and standard rate (mid-point of 12 to 18%) with luxury and sin goods as exception.
• Mr Jaitley, while taking a jab at Congress’ legacy of 31% indirect tax, said that GST has helped in controlling inflation and evasion has also come down.