ASSOCHAM welcomes report of CEA-led committee’s suggestions on GST rate

Instead of a composite 40% excise duty on non-merit goods, what would be desirable is a combination of GST at the standard rate and a “sin” tax component not eligible for input tax credit. Local media also reported the draft bill will be discussed in the Upper House this week.

The Arvind Subramanian panel has done well to recommend a moderate standard goods and services tax (GST) rate of 17-18%, and also scrap the 1% inter-state sales tax. A Constitution Amendment Bill is now stuck in Rajya Sabha.

While arguing that the GST will be good for the economy, experts said that people may have to shell out more for services as the GST rate is more than the current service tax, which is just 14.5 per cent.

Services which will be taxed more include telephone bills, restaurants, financial solutions, banking, air travel, healthcare, lodging, laundry, gym, etc.

“This rate structure is quite appropriate and will be anti-inflationary for indigenous goods”. Multiple rates are not inimical to GST. Now some sectors enjoy the concessional rate. “So they have to plead with the government for a concessional rate”, Ms Rastogi explained. Mr Pawaskar said that it will be too early to comment on the final rate because 40 per cent is a recommendation.

The Grattan Institute says this can be solved by spending roughly 30 per cent of the extra revenue raised from a higher GST on increasing the base rate of all welfare payments – including pensions, Newstart, and family benefits – by 5 per cent. Currently, one to two per cent Value-Added Tax rate is applied for precious stones, precious metals like silver, gold and platinum, bullions, jewellery, etc.

That would leave about 40 per cent of the additional revenue raised from a broader or higher GST – between $7 billion and $11 billion – for state governments to improve their health budgets, and for the Commonwealth government to reduce its budget deficit, or to pay for other taxes that promoted economic growth.