Arvind Subramanian led panel suggests 17-18 percent GST rate

The committee headed by Arvind Subramanian on goods and services tax (GST) rates has came up with an amicable solution to the ongoing confrontation of the government and the Opposition, and has suggested 17-18 percent GST rate and dropping of the one per cent additional tax on inter-state sales. An executive summary of the report released alongside suggested the rate to be between 16.9-18.9 percent in a tabular form.

The panel suggested a range of 'standard' tax rate of 17-18 percent for bulk of goods and services, while it recommended 12 percent for 'low rate goods' and 40 percent for demerit goods like luxury car, aerated beverages, pan masala and tobacco. For precious metal, it recommended a range of 2-6 percent.

The panel opined against providing a 'band of rates' saying it complicates administration of the tax machinery and suggested that evaluation of GST implementation should not be taken over short-term period, but over longer period of time like 1-2 years.

Also, the panel recommended early inclusion of alcohol and petroleum products in GST, saying that Bringing alcohol and real estate within the scope of the GST would further the government's objectives of improving governance and reducing black money generation without compromising on states' fiscal autonomy.

The Arvind Subramanian-headed panel, however, opposed inclusion of GST rate in the Constitution. The Congress has been demanding GST rate be included in the Constitution. Subramanian added that once the GST is implemented the indirect tax regime in India would be the best in emerging market economies and high income countries. The government wants the GST Bill to be approved in the current session of Parliament to meet the April 1, 2016, rollout deadline.