News shortcuts: From the Courts | Top Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | Professional Updates | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
« Service Tax »
 Service Tax can’t levied If No Services are provided to Distributors and No Payment is made: CESTAT
 Tax relief likely on creation of ‘permanent establishment’
  Here're 5 key changes that come into effect from June 1 From income tax to trains
 Odisha government exempts taxation for three months tax on contract carriages
 New rules seek to make tax return processing, assessments more effective
 How can your parents, spouse, children help in saving taxes?
 Punjab extends deadline for paying property tax till June 30
 ITC can be availed on Detachable Sliding and Stackable Glass
 Give us tax certificates instead of tax refunds if money is a problem: Companies tell government
  Making the smart choice Old tax regime or new regime
 Five announcements on EPF and income tax made by FM Nirmala Sitharaman today

GST: Cut the rate, extend coverage
April, 12th 2017

Most goods (nearly 70%) will reportedly attract a goods and services tax rate of 18%. This is welcome. This rate is less than half of the current cumulative burden of indirect taxes on goods. Consumers will gain as most of these taxes will be subsumed under GST, cutting out the cascade of multiple levies that products bear, and lower retail prices. Most services should also attract the 18% rate when all taxes levied on goods and services are collapsed into one.

It is more than the so-called revenue-neutral rate — one that would leave revenues no worse off — considering that the combined tax collections of the Centre and states are about 17% of GDP now. Of the total collections, corporate, personal income and customs fetch about 7 percentage points of GDP, and the taxes that would be subsumed under GST yield about 10% of GDP.

Globally, the average VAT rate is about 16.4%. So, increasing the coverage of GST will make it possible for the Centre and states to lower the rate.

India will have a fourtier GST structure with rates ranging from 5% to 28%. Rates can converge when exemptions are removed and all goods and services are steadily brought under the tax net. It will also declutter the tax system. Regrettably, a large chunk of the economy, which includes real estate, electricity, alcohol and petroleum products, is out of GST.

This breaks the GST chain — wherein manufacturers get credit for the taxes that they pay on inputs — and increases scope for evasion. The GST Council should swiftly bring the excluded items also under GST.

Sensibly, the health ministry wants all tobacco products that include biris (beedis) to attract the highest tariff of 28% and a sin tax component of 15% that will not be eligible for input tax credit. The idea is to generate revenues and penalise a health hazard. Hefty taxes on cigarettes have restrained their use, but increased consumption of tax-evading smuggled cigarettes, besides of other tobacco products, some of them more harmful than cigarettes. The GST Council should just not heed to demands for sector-specific concessions.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2020 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting