New Delhi: The revenue-neutral Goods and Services Tax rate should be 15 per cent, Chief Economic Adviser Arvind Subramanian on Friday after submitted a 100-page report to the Finance Minister Arun Jaitley.
GST will create common market which will in turn facilitate Prime Minister Narendra Modi’s ambitious ‘Make in India’ , he said.
Subramanian said the RNR rate is the rate that will “preserve all revenues”. In practice, there will be a lower rate and a higher standard rate that will apply to a majority of goods.
The full report will be made public on Monday.
In June, the government formed a committee under Subramanian to relook at the proposed revenue neutral rate of 27 per cent, which Finance Minister Arun Jaitley conceded to be “very high”.
Keeping in mind the GST roll out deadline of April 2016, the finance ministry set up the panel to recommend a revenue neutral GST that will be acceptable to all stakeholders.
The committee will also be tasked with identifying the impact of the change in the indirect tax regime on a state-wise and central level. The committee has been asked to submit its recommendations within two months.
The Committee will have its task cut out, particularly as the states do not levy tax on services. The disparity in the levels of tax on goods and services under the present indirect tax regime is another major hurdle which the Committee will face while attempting to arrive at the final GST rate.
In the past, the NIPFP was mandated to suggest a revenue neutral rate. But the proposed GST rate of 27 per cent was deemed to be too high.
In July, the Parliamentary Select Committee has favoured “moderate” goods and services tax rate of less than 20 per cent but accepted the 1 per cent additional levy by manufacturing states.
The Chief Economic Adviser has expressed strong reservations on the GST Constitutional Amendment Bill in its current form especially the 1% origin based additional duty.