- Committee headed by Chief Economic Adviser Dr. Arvind Subramaniam submitted its Report on possible GST rates to Finance Minister
- According to the Committee, GST will help improve governance, strengthen tax institutions, facilitate “Make in India by Making One India” and impart buoyancy to tax base, while setting global standard for VAT in large federal systems in years to come; Report recommends conditional rate structures that depend on policy choices made on exemptions and taxation of certain commodities such as precious metals, and accordingly suggests Revenue Neutral Rate (RNR) in the range of 15% to 15.5% (Centre & States combined), Standard Rate between 17% to 18% for taxing maximum possible tax base & lower rate of around 12%; Also recommends sin / demerit rate of about 40% (Centre plus States) applicable to luxury cars, aerated beverages, pan masala, tobacco and tobacco products (for States)
- Clarifies that allocation of such combined rates between Centre & States will be determined by GST Council, as per their revenue requirements, while discouraging “band” of rates; Report strongly recommends rationalisation of exemptions between Centre & States, states that instruments other than tax exemptions such as direct transfers could be deployed to meet policy objectives of cleaner overall tax system
- Further, Committee recommends eliminating all taxes on inter-state trade, including 1% additional tax, and replacing them with one GST and bringing alcohol, real-estate, electricity & petroleum within GST ambit while eliminating exemptions on health and education
- Lastly, states that evaluation of GST and any consequential decisions should not be undertaken over short periods, facilitating easy implementation and taxpayer compliance at an early stage via low rates & without adding to inflationary pressures will be critical : Finance Ministry Press Release