It is important to know that what would be the GST rates. The first most purpose of GST is not to increase the tax revenue of Government of India but to bring tax reforms in India. So thant the GST tax rates would be almost same to the current tax rates.
The tax rates of GST is still an unresolved issue due to the intricacies involved with it. Here we are discussing the various development on GST rates till date.
As we know GST will merge various tax laws which are presently governed by central and state government. The present approx. combined tax rate is around 25% ( Cenvat of 12.50 % and VAT of 12.50%).
The Kelkar Task Force Report has proposed GST rate to be of 20%, of which 12% would go to the central government and 8% to the states.
Revenue Neutral rate (RNR) is another concept which is also proposed to apply for determining the GST tax rates. In RNR, the GST rate will be such that it will yield the same revenue as collected from the various taxes which will be subsumed in GST.
The first discussion paper released by the empowered committee has decided to adopt a two-rate structure for goods.
- A lower rate for necessary items and goods of basic importance and
- A standard rate for goods in general.
There will be special rate for precious metals and a list of exempted items.
However there may be a single rate for taxation of services.
According to the comments of Departments of revenue on first discussion paper, there should be a single rate of GST for goods and services. A two rate structure of goods would pose many problems.
As per constitutional (122nd Amendment ) Bill, 2014, the central government will levy an additional tax on supply of goods, not exceeding one percent in the course of inter-state trade or commerce. This additional tax will be collected by the government of India for a period of two years, and assigned to the states from where the supply originates.
There are many other issued involved with GST rates like compensating the states for their loss of revenue, deciding the list of goods to be exempted from GST etc.
It is important to keep the India’s GST tax structure as simple as possible otherwise it will become unmanageable.