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GST Logjam: CEA Panel Suggests Dropping 1% Additional Tax

The panel has suggested a revenue neutral rate for GST of 15-15.5 per cent and a standard rate of 17-18 per cent

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In recommendations aimed at breaking the GST logjam, a panel headed by Chief Economic Advisor Arvind Subramanian on Friday (4 December) suggested dropping additional one per cent tax on inter-state sales over and above the Goods and Services Tax (GST) rate.

The panel, however, did not favour putting the rate of GST, which seeks to replace all indirect taxes including excise, service tax and sales tax, in the Constitutional Amendment Bill.

It has suggested a revenue neutral rate for GST of 15-15.5 per cent and a standard rate of 17-18 per cent.

The main opposition party Congress, which had blocked the GST Bill in the Rajya Sabha in the last session of Parliament, has been demanding a simple GST and scrapping of the proposed levy of one per cent additional tax on goods. The party has also been demanding that the rate be part of the Constitution Amendment Bill.

The panel, with a mandate to suggest a revenue-neutral rate for GST, has favoured no additional tax on inter-state sales, including one per cent proposed in the GST Bill.

It also suggested inclusion of alcohol and petroleum products in GST, as is being demanded by the Congress.

The recommendations seem to suggest a middle-path approach in the deadlock between the Congress and the government, which didn't want the GST rate to be part of the bill as it would require two-third majority approval of Parliament for any change in future rates for any product.

The government wants the GST Bill to be approved in the current session of Parliament to meet the April 1, 2016, rollout deadline.