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As per the Centre’s proposal, 99% of goods taxed at 12% would move to the 5% slab, while 90% of items in the 28% slab would shift to 18%
Many household products, which are currently taxed at 12% are expected to move down to the 5% slab under the new reform. (Getty Images)
GST Meet: The proposed two-tier Goods and Services Tax (GST) structure could lower the effective tax rate while boosting fiscal revenues over the long term, said YeeFarn Phua, Director at S&P Global Ratings, on Tuesday.
His remarks come ahead of a key meeting between the Centre and states on August 21-22 to discuss the Centre’s GST reform plan. The proposal aims to simplify the current four-slab system—5%, 12%, 18% and 28%—into just two rates of 5% and 18%, along with a special 40% rate on select items.
The government has been pushing for reforms in the GST regime to improve compliance, reduce disputes and make the indirect tax system more efficient. GST, which was rolled out in July 2017, is one of the largest sources of tax revenue for both the Centre and states, but multiple slabs and frequent classification disputes have often complicated implementation.
Phua noted that the present multi-slab GST regime is complex, making accounting and implementation cumbersome. A streamlined two-rate system, he said, could ease compliance and reduce disputes.
“While the effective rate may be marginally lower, simpler implementation and improved compliance could support fiscal revenues in the longer run,” Phua said at a webinar. He added that the move is unlikely to hurt overall collections and may even spur consumption in the short term.
As per the Centre’s proposal, 99% of goods currently taxed at 12% would move to the 5% slab, while 90% of items in the 28% slab would shift to 18%. The rejig is also expected to reduce classification disputes, litigation and duty inversion issues.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
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