Kelkar backs single GST rate, says it’s easier to roll out


NEW DELHI: Former finance secretary Vijay Kelkar has backed a single rate for the Goods & Services Tax (GST) saying it would help the authorities administer it better before considering multiple rates.

The GST council, which has representatives of states and the Centre, has finalised a four-tier GST rate structure of 5%, 12%, 18% and 28%, with lower rates for essential items and the highest for luxury and de-merits goods that would also attract an additional cess.

“Our first objective should be to establish easy objectives for state capacity, and fully succeed in building this state capacity. Only after this is done should we try for a more complex problem. As an example, it is better to first build a single-rate GST with a low GST rate, achieve full mastery of this, and only then consider more complex possibilities such as high rates, multiple rates etc,” said Kelkar, who is the president of the Indian Statistical Institute and chairman of the National Institute of Public Finance & Policy.

“There are the consequences for GDP of the political economy of lobbying for tax changes, which arise when we do not have simple, single-rate, tax systems. For example, if there was only one customs duty (e.g. 5%), this would be much better than having different rates. Eighty percent of the countries that have introduced a GST after 1995 have opted for a single-rate GST,” he said while delivering the CD Deshmukh memorial lecture on Friday evening.
A panel set up by the 13th Finance Commission under Kelkar had talked of a single GST rate of 12%. It had said a substantially lower, uniform, and combined single rate of 12% on all goods and services will reduce the economic distortion and the incentive to evade.

Kelkar, who has straddled the public policy space for nearly 40 years, also called for privatisation of state-run firms such as Air India and Steel Authority of India (SAIL).

 “To me, the promotion of competition is the uppermost reason to promote the policy of privatisation of PSUs like Air India or SAIL. The presence of such public sector players with deep pockets and soft budget constraints distorts competition and leads to an inefficient allocation of national resources,” he said.

2 Replies to “Kelkar backs single GST rate, says it’s easier to roll out”

  1. Durai Raj says:

    I welcome Single Rate @12% GST.

  2. Kannan Pasupathiraj says:

    Introduction of GST should be under a single tax applicable to all goods and services. This will give the tax authorities and the respective ministries to get a good grip of the impact in the initial stages, could be 3 years. Then based on the effect slabs can be introduced. Having slabs would lead to confused businesses and will become a mischief grounds for tax authorities.

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