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Centre and the states working on a new revenue neutral rate

21 Apr 2015 Evaluate

Moving a step forward in the direction of implementing Goods and Services tax (GST) by April 2016, the Revenue Secretary Shaktikanta Das has said that the Centre and the states are working on a new revenue neutral rate (RNR), which is currently pegged at 27 percent. Das said that the RNR is being recalculated and once the 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.

Earlier, a sub-committee on GST in November 2014 had suggested that the RNR of GST be pegged at about 27 percent. The sub panel had suggested states GST at 13.91 percent and Central GST at 12.77 percent. The Revenue Neutral Rate is the one at which there will be no revenue loss to the states after GST implementation and its recalculation was considered necessary as at present it does not take into account the taxation of petroleum products as also the 1 percent additional tax which states can levy as part of the GST Bill, which was tabled in the Lok Sabha in December.

While liquor has been completely kept out of the GST, petroleum products like petrol and diesel will be part of the new regime from a date to be decided at a future date by the GST Council, which will have two-third of its members from states. All decisions in the Council will require 75 percent votes and after RNR is recalculated, the GST Council will take a decision.

The new tax regime is scheduled to be rolled out from April 1, 2016, after carrying out the necessary constitutional amendment in the ongoing session of Parliament. A single rate GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax on goods and services.

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