GST rate needs to be competitive: CEA

Arvind Subramanian says GST needs to be internationally competitive and broadbased

The finance ministry’s chief economic advisor has proposed a competitive goods  and services tax (GST) rate, yet to be deliberated on by a proposed council to be comprised of the Union and state finance ministers.

“When we start a GST regime, we want to have a really good one. That means our rates have to be internationally competitive and GST broadbased,” said Arvind Subramanian, the CEA,  at an interaction with  business people at a Federation of Indian Chambers of Commerce and Industry-organised event here.

He said these discussions will happen in the GST council. “But, I think the more industry harps on that, (it is) very very important. All of you send out that message,” he told them. Later, Subramanian told reporters that an internationally competitive rate for GST and a broad base are desirable objectives.

A sub-panel of the Empowered Committee (EC) of State Finance Ministers on GST had recommended close to a 27 per cent goods tax under the proposed regime. A revenue-neutral rate,  at which where will be no revenue loss to the states after adoption of GST, as pegged at 13.91 per cent. These rates are being studied by the National Institute of Public Finance and Policy.

The CEA refused to be drawn into  whether the service tax rate would be higher after the Swachh Bharat cess of up to  two  per cent is imposed on some services, saying he was not the revenue secretary.

Central Board of Excise and Customs (CBEC) Chairman Kaushal Srivastava said the Budget subsumed education cesses into excise duty and the service tax was to move  towards the GST regime.

On the increase in service tax rate to 14 per cent from 12.36 per cent,  he said, “In the GST regime, both the Centre and the states would levy tax on the supply of services and the combined rate would be somewhat more than the present rate.”

The government has targeted GST roll out from April 2016 and has introduced the Constitutional Amendment Bill in the Lok Sabha. It  is  required to be passed with a two-thirds majority in both chambers of Parliament. After that at least half of the states — 15 — have to ratify the Bill.  

Then, the respective GST Bills will have to be  passed by Parliament and the respective state legislatures.

Currently, there is no chairman of  the EC, after Abdul Rahim Rather, former finance  minister of Jammu and Kashmir, lost in the recent state elections. The Committee  is likely to meet on March 20 to select a chairman.