Proposed modest GST rate will facilitate rollout: Experts

With the Arvind Subramanian panel suggesting a middle path for GST, tax experts today hoped that the recommendations of a modest rate will clear the way for implementation of the much-anticipated Goods and Services Tax (GST) regime.
Saloni Roy, Senior Director, Deloitte in India, said that at the standard rate of 17-18 per cent as suggested by the panel, goods and services will be expensive.
"At this rate, services are likely to become more expensive as the difference between the current rate of service tax and the suggested rate of GST is significant. However, this impact can be mitigated to some extent depending on tax credits available to the service provider under the GST regime," she added.

The report by the chief economic advisor has suggested the revenue-neutral rate of GST around 15 per cent to 15.50 per cent and it will support the GST council in finalising the final rate of GST.
The committee has also suggested that the lower rate of GST could be around 12 per cent and a demerit rate of around 40 per cent. This is the combined state and central GST rate.
Roy said the suggested standard rate of GST appears to be a modest rate for manufacturers who currently suffer from the levy of central excise duty at 12.5 per cent as well as state levies which may be as high as 14.5-15 per cent.

Sachin Menon, Partner and Head-Indirect Tax and COO-Tax & Regulatory Services, KPMG in India, said the ruling and opposition parties can come to an agreement based on the recommendation.

"I hope this recommendation would expedite the process of introduction of GST in India," he said. "If the government finds the revenue collection down, the GST council can revise the rate upwards any time."
Menon said broadening the tax base through better compliance, capturing value addition post manufacturing, removing exemption and increase in expected consumption could be the swinger towards recommendation of a lower revenue-neutral rate.
"The recommended GST rate of 16.9 per cent of 18.9 per cent is hugely welcome though the demerit rate of 40 per cent looks to be on a much higher side," said Rajeev Dimri, Leader, Indirect Tax, BMR & Associates.

"The government's continued action to push the GST Bill through has reignited the hopes of the country that the GST may see the light of day some time during the next fiscal year, if not from April 1 itself," he added.
Also, the idea of not putting rate caps in the constitution is "pragmatic", considering the dynamic business environment which may demand future changes in the GST rate.
"Recommendation towards wider coverage of sectors (including petroleum) within GST is much desirable in the interest of a cleaner indirect tax regime," he said.
R Muralidharan, Senior Director, Deloitte in India, said abolition of the 1 per cent tax on inter-state supplies would help creation of a national market and is "a welcome recommendation".