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Why India decided on four slabs for GST

The multiple tax slabs of the present structure of GST (Goods and Services Tax) has attracted criticism from certain quarters, given that it's not exactly 'one nation, one tax'. Currently, the goods and services are categorised under four slabs- 5, 12, 18 and 28 per cent with few items like gold and rough diamonds attracting exclusive rates. A certain section of the industry believes that it defeats the basic purpose of GST i.e. simplifying the old tax structure. Finance Minister Arun Jaitley, last week while speaking to the media, clarified the rationale behind the four-slab structure. He said that the slabs have been created keeping the interests of the poor in mind. A single rate of 15 per cent for all goods and services could have been introduced as that would have generated almost the same amount of revenue. However, he was quick to add that it would have been unfair to the poorer sections of the society. " A single-rate (15 per cent) GST would have lead to slapping tax on food items that are exempted under the existing GST structure and that would have been detrimental for the poor," the Finance Minister said. Elaborating further he said that indirect taxes like GST being regressive in nature, makes the rich and poor pay the same tax for a product or service. Thus, it was important to create separate slabs as otherwise it would mean "taxing hawai chappal (slippers) and Mercedes car under the same rate." Slamming the 'intellectuals' who are criticising the multiple-tax slab system, Jaitley said, " People should have some elementary understanding before participating in public discourse". Revenue Secretary Hasmukh Adhia has said that a 'single-rate GST' is the 'ultimate goal' for the government. "Ideally like all other advanced countries, we should have got one GST which is levied by one government only, and not a dual GST and also a GST in which there is a uniform rate. In our country, where there are different strata of society to be looked after, it's not possible to have an ideal GST. We are in a good direction. We will prefer to have a single GST rate but after sometime. That should be the ultimate goal — instead of having too many complicated rates, at least one or two rates should be there," Adhia had said last week.

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