Weighted average of GST rates should be 20%: Haseeb A Drabu

Interview with Finance Minister, Jammu and Kashmir

As the GST Council met on Tuesday for the third round of deliberations, Jammu and Kashmir Finance Minister Haseeb A Drabu tells Ishan Bakshi that ideally, there should not be multiple GST rates, but in practice these are difficult to avoid. However, the weighted average of GST rates should be 20 per cent. Edited excerpts:

In the previous meeting, a consensus was reached on administering the service tax, which appears to have broken down now. Can you tell us why? Which states objected? Is a consensus likely to emerge?

We are trying to work out a consensus. This issue of dual control has been there since the beginning. It is a question of who will levy what tax. States would levy taxes below Rs 1.5 crore, while above that the Centre would levy. But there was a misunderstanding. The Centre is of the opinion that they will levy taxes on goods (above Rs 1.5 crore) and on all services for a year. But no large state was on board with this. This is where it stands today.

On the issue of compensation, while states want tax collections of the three best years of the last six to be taken into account, the Centre is disagreeing. What are your views on this?

It will be the average of three best years of the past five years.

On the issue of area-based central tax exemptions, if the Centre refunds the tax collected, will states also do the same, considering that states get 42 per cent of the central tax collections?

I had raised this issue. The Centre has been very sketchy in defining what revenue is. Is cess a revenue? Is exemption a revenue?

Revenue neutral rates (RNRs) are also likely to be discussed. What in your opinion is the ideal RNR?

Ideally you should not have multiple rates. But there is a feeling among states that having one rate will be difficult for various reasons. So you will have multiple rates. But what should be looked at is the weighted average of the rates and that is somewhere around 20 per cent.

Rules for registration approved by the GST Council makes it mandatory for businesses to file at least three monthly returns and one annual return for each state they are operating in. Will this not make cumbersome to do business in India?

These are operational details, not issues. The GST Council can decide.