NEW DELHI: Chief Economic Adviser (CEA) K V Subramanian on Thursday assured that government is considering rationalisation of GST to three rate slab structure and it is going to happen soon.
“The three-rate structure is something... definitely important and even the inverted duty structure (is) also equally important to actually fix. I think the government is definitely seized of the matter. So we should hopefully see traction on that soon,” Subramanian said. He was speaking at a virtual event organised by industry body Assocham.
He also spoke of the need to fix inverted duty structure which had been postponed since last three GST council meetings. At present GST has five rate structures — 0.25%, 5%, 12%, 18% and 28%. There was long pending proposal to merge 12% and 18% slab and finally bringing down to three, suggested by former finance minister Arun Jaitley. However the government wanted to take more time to observe the revenue pattern before going for the overhaul.
Covid-19 also delayed many GST related reform like inverted duty structure and reducing of slabs, keeping in mind the uncertainty regarding revenue collection. This was strongly recommended by the 15th Finance Commission (FFC) also, in its latest report.
“Restoring revenue-neutral rate will mean merging the rates of 12% and 18% and operating with a three-rate structure of a merit rate, a standard rate and a demerit rate of around 28% to 30% and minimising (tax) exemptions,” said the FFC report, which recommended the ways of sharing Centre’s tax revenue with states for the period 2021-26.
Subramanian, however, defended the rationale behind going ahead with five slabs during launch of GST.
“The GST, the way it got created with actually five rates was basically excellent because now we are seeing the impact on GST’s amounts that are coming in... the policymakers then must be given credit for actually being practical enough to say, let’s get it going first,” Subramanian said.