Study Material | Test Series
Drishti IAS
call1800-121-6260 / 011-47532596
Drishti The Vision Foundation
(A unit of VDK Eduventures Pvt. Ltd.)
Q. Multiple rates of GST: Comment on recently proposed multiple rates for Goods and Service Tax.
Oct 21, 2016 Related to : GS Paper-3

Ans :

Introduction-

Recently central government has proposed four rates, ranging from 6% to 26% for the goods and services tax (GST), with a cess on the highest tariff for ultra-luxury and demerit goods. The four rates are 6%, two standard rates of 12% and 18%, and the highest rate of 26%, to cover a broad range of goods and services

Proposes rates-

  • The structure proposes the GST at 0% on a host of goods and services, including food, health and education services.
  • The rate for gold has been proposed at 4%.
  • 26% on luxury items, such as fast-moving consumer goods and consumer durables.
  • The GST is proposed to be levied at 6%, 12% or 18% on the remaining goods and services.

Analysis-

  • The principle and rationale behind the proposed tax slabs is to levy and collect the GST at the rate slab closest to the current tax incidence on it. 
  • Many people are arguing against multiple rate slabs won’t work in the Indian context, but notion that multiple rates are hostile to GST is misplaced. 
  • Multiple rates have functioned in the EU where value added tax (VAT) rates vary among member states, and there is no reason why it will not work in India.
  • Two standard rates of 12% and 18%, presumably worked out after excluding real estate, electricity, alcohol and petroleum products, will cover a majority of taxable goods. 
  • A lower slab of 6 per cent for essential goods that do not attract excise duty is welcome move, given that exemptions break the GST chain, increase the possibility of evasion and create systemic inefficiencies. 
  • A 4% GST on gold is aimed to contain the attractiveness away from gold and reduce inflationary pressures.
  • The newly proposed four slabs for GST rate on all items are by and large lower than the current rate.
  • The rationalised rate for each items based on its importance makes sense, and same has been practised in most of the developing countries. Hence it is welcome move in the Indian context.

Conclusion-

The recently proposed different GST rate slabs are under active consideration in GST council. The proposed rates are close to the current tax rates. Though it has been opposed by many, but the notion behind it is misplaced. Definitely these multiple tax slabs works in India, if it is implemented effectively. 

 


Helpline Number : 87501 87501
To Subscribe Newsletter and Get Updates.