The GST Council may in future decide to reduce the tax slabs under the Goods and Services Tax regime after analysing the revenue garnered and the compensation payouts to states, CBEC chairman Najib Shah said on Thursday.
With industry demanding lowering of proposed GST rates of 5%, 12%, 18% and 28% post the demonetisation, Najib Shah said the Centre and the states at present collect Rs8 lakh crore from indirect taxes, minus customs duty, and the same level of revenue has to be collected in the GST regime. Any change in tax slab is possible after assessing the revenues and the effect of exemptions and deductions given in the new tax regime and analysing it with the expenditure.
“Once we see how much money is collected from these taxes, we can certainly look at the rates. It is not cast in stone. GST Council has complete flexibility to do so and will do so I am sure,” Shah said at an Assocham event here.
In November, the GST Council, which is headed by Union finance minister and has state representatives, agreed on the four-slab structure along with a cess on luxury and ‘sin’ goods such as tobacco.
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“The Central government has committed to compensating the states for five years. Now it is a huge burden which Central government has cast upon itself. The underlying theme is GST will increase revenues and the need for compensation perhaps will be lesser,” he said.
Shah said that the GST Council has to take into consideration the range of products under GST and the political compulsion of every state while taxing them. Currently VAT and excise duty on commodities ranges from 6% to 300% on sin goods.
“Where do we get the money from if we don’t have the flexibility to have rates. That the task of fitting a product to a rate is easier said than done. How do we still give money after giving exemptions... “The multiplicity of rate is a necessity both economic and political. Now should we reduce that number from 5 to 3 to 2? Once we see how much money is collected from these taxes, we can certainly look at the rates,” Shah said.
He said the officers committee has already started work on which goods is to be placed in which tax bracket and the final call would be taken by the GST Council. Dismissing suggestion of having single rate GST as in EU, he said the wide range of products and their varied taxation rates make it imminent to have multiple tier tax structure.
“How can you possibly have one rate for edible oil and car or for atta and computers. We cannot have one rate. We can reach one rate 20 years down the line. EU, several countries have one rate of 18% or 20%, will that be acceptable to us? It would not be acceptable for us. We have to have multiple rates,” Shah said.