After the main Opposition Congress’s demand for capping the goods and services tax (GST) at 18% and including it in the Constitution Amendment Bill was brushed aside in the finance ministers’ meeting on Tuesday, the question being asked by many is: Which way would the standard rate of the unified indirect tax now go?
Most economists believe that even with no cap the GST rate may remain around 18% and could even fall below it if the existing low tax rates of some items are raised and a few excluded products are included.
The Arvind Subramanian report on GST, brought out in December last year, has recommended a revenue-neutral rate (RNR) of 15-15.5%, with a standard rate of 17-18%.
The report has split the rate into three slabs with essential goods taxed at 12%, demerit items like luxury cars, aerated beverages, pan masala and tobacco products at 40% and the rest at a standard rate of 17-18%. It has proposed all services to be taxed at the standard rate of 17-18%.