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Tax Rates A Big Fighting Ground In Gst, By Ca Rajat Mohan
Posted under VAT Articles |
Posted By: rajat on December 23, 2010
Tax rates a Big Fighting ground in GST
CA. RAJAT MOHAN
Goods and Service Tax is by far the most important tax reform of independent India, but today we stand at less than 7 months away and even tax rates have yet not finalized. There seems to be no consensus among Centre and States on this subject. Change of rate will going to have big impact on every small and big businessman. Expansion plans in industry are put on hold till the rate structure is bit more clear.
I. Empowered Committee of State finance Minister’s
Empowered Committee of State finance Minister’s opined that SGST as well CGST for goods should have two-rate tax structure:
(a) Lower rate - for necessary items and goods of basic importance;
(b) Standard rate - for other goods in general.
They further stated that Services shall have One Tax Rate, precious metal shall be at special rate. However, they have remained silent on specified rate.
II. State Finance Minister’s Meeting
In a Meeting held on 16 September 2009 between State Ministers: It was reported in media that the SGST for goods would have the following combination:
Ø Items of mass consumption: Low rate of 4% - 5 %;
Ø Precious metals: Rate of 1%;
Ø Goods of local importance, decided by state: No tax; and
Ø Most items: Standard rate of 8% - 9%
III. Report by Department of Economic Affairs
Working Paper No.1/2009-DEA on GST Reforms and Intergovernmental Considerations in India issued by the Department of Economic Affairs, Ministry of Finance, Government of India suggested that GST would need to be levied at a combined Centre-State tax rate of 20%, of which 12% would go to the Centre & 8% to respective State.
IV. Task force implementation report
Task force implementation report has specified that Goods would be categorized as:
1) SIN Goods; and
2) Non SIN Goods
The rate of CGST and SGST on all non-SIN goods and services should be fixed at a single positive rate of 5 % and 7 %, respectively i.e. total combined GST rate would be 12%.
As worked out in Task force report Revenue Neutral Rate for the CGST was worked out to be 5%. Similarly, the Revenue Neutral Rate in respect of the state level taxes which are proposed to be subsumed in the SGST is estimated to be 6%. Therefore, the combined Revenue Neutral Rate is estimated to be 11 %.
V. 21 July, 2010 Speech of Finance Minister at the Meeting with the Empowered Committee of State Finance Ministers.
Single rate structure may not be feasible on the date of introduction of GST and requires a phased approach so that the transition is smooth and painless both for the taxpayer and the administration. We are agreeable to the adoption of a dual rate structure for goods at the inception of GST.
In the first year of introduction i.e. 1st April, 2011:
|
Particulars |
CGST |
SGST |
GST |
|
Lower rate for goods |
6% |
6% |
12% |
|
Standard rate for goods |
10% |
10% |
20% |
|
Services |
8% |
8% |
16% |
In the second year of introduction i.e. 1st April, 2012:
|
Particulars |
CGST |
SGST |
GST |
|
Lower rate for goods |
6% |
6% |
12% |
|
Standard rate for goods |
9% |
9% |
18% |
|
Services |
8% |
8% |
16% |
In the Third year of introduction i.e. 1st April, 2013:
|
Particulars |
CGST |
SGST |
GST |
|
Lower rate for goods |
8% |
8% |
16% |
|
Standard rate for goods |
8% |
8% |
16% |
|
Services |
8% |
8% |
16% |
VI. In view of this scenario, we might see the rates of taxes and date which this tax was introduces in foreign countries.
|
S. No. |
Country |
Date VAT introduced |
Rate of VAT/GST |
|
|
Australia |
2000 |
10 |
|
|
Bangladesh |
1991 |
15 |
|
|
Belgium |
1971 |
21 |
|
|
Brazil |
1967 |
19 |
|
|
Canada |
1991 |
7 |
|
|
Egypt |
1991 |
10 |
|
|
Finland |
1994 |
22 |
|
|
Germany |
1968 |
19 |
|
|
Ghana |
1998 |
12.5 |
|
|
Italy |
1973 |
20 |
