The Centre and states are working to thrash out their differences over a new revenue neutral rate for goods and service tax (GST), ensuring no revenue loss for the latter under the new regime.
The Centre is looking at 16-18 per cent, but the states want 25-28 per cent as the revenue neutral rate for GST, which is expected to be rolled out by April 2016. A bill on the tax was tabled in the Lok Sabha in December.
“RNR (revenue neutral rate) is being recalculated and once RNR is recalculated, then what will be the GST rate will be a matter to be decided by the GST Council under the Constitutional Amendment,” revenue secretary Shaktikanta Das said.
He said it was necessary to have a new rate as one has to take into consideration the inclusion of petrol within GST in the future. Besides, the extra levy of 1 per cent on goods subject to GST would ultimately go.
“The earlier RNR has to be changed because there have been many changes thereafter relating to GST. On petroleum, VAT and excise will continue for some time. Additional 1 per cent tax on inter-state supply of goods is also a new concept. The old number does not hold good anymore,” Das said
Fuel items such as petrol and diesel will be part of GST from a date to be determined by the GST council, which will have two-thirds representation from states and where at least 75 per cent must vote in favour of any change.
While liquor has been completely kept out of the new regime, states where goods originate can levy 1 per cent additional tax over GST to make up for any revenue loss for the first two years.
A sub-committee in November had suggested that RNR be fixed at about 27 per cent – 13.91 per cent GST for states and 12.77 per cent for the Centre.
However, the finance ministry at that time had forwarded a proposal to set GST at 16-18 per cent. After it is recalculated, the GST council “will take a decision,” Das said, adding that an “internal team” is reworking RNR.
Finance minister Arun Jaitley had last week said that the implementation of the landmark tax regime would increase India’s GDP by 1-2 per cent.
The single rate GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax on goods and services.