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  3. CEA hints at possible merging of 12% and 18% slabs of GST

CEA hints at possible merging of 12% and 18% slabs of GST

21 Nov 2017 Evaluate

Chief economic adviser (CEA) Arvind Subramanian has hinted that government may combine the 12 per cent and 18 per cent slabs for goods and services tax (GST) into one in the near future and reserve the 28 per cent rate only for demerit goods. According to Subramanian, it is only a matter of time before rates converge into three slabs and commodities such as land are brought under the purview of the GST.

He added that India will never move to a single GST rate, over time there would be a “poor man’s” rate (0 per cent and 5 per cent), a “core” rate (the 12 per cent-18 per cent combination), and the demerit rate (28 per cent). He also pointed that Cement and white goods are not demerited goods, but the government was deliberately “going slow” on those items due to revenue considerations. He said “I never liked the 28 per cent slab, which I think has created some of the transitional challenges. I think we are very close to making 28 per cent just for demerit goods… 0 per cent and 5 per cent has quite a lot of the tax base and there I think we will not be able to make that much progress as we have to protect the poor. But the 12 per cent and 18 per cent, at some point, can be combined in the foreseeable future into one rate.

Subramanian said land, real estate and natural gas could soon come within the purview of GST, and added that he supported the early inclusion of electricity as well. According to Subramanian, the rollout of the goods and services tax (GST) had initiated a very welcome recast of the federal polity of India and should serve as a template to address the overhang of development challenges.

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