Single GST rate may replace 12% and 18% tax brackets in the future, says Arun Jaitley
The 28% slab will be phased out soon, the union finance minister added.
Union Finance Minister Arun Jaitley on Monday said a single tax rate might replace the 12% and 18% brackets of the Goods and Services Tax in the future, and termed the 28% tax bracket a “dying slab”. The GST system has five tax slabs – zero, 5%, 12%, 18% and 28%.
The minister said there has been a gradual transformation in the tax system since its implementation in July 2017, and pointed out that any abrupt change could have been detrimental to revenue or trade.
Jaitley, in a blog post to mark 18 months of the implementation of the GST, said cement and automotive parts were the only items of common use that remain in the 28% slab. “Our next priority will be to transfer cement into a lower slab,” he added. “The sun is setting on the 28% slab.”
Jaitley made a pitch for a structure with only three slabs – zero, 5% and a standard rate between the current 12% and 18% slabs – with luxury and sin goods as exceptions. “Obviously, this will take some reasonable time when the tax will rise significantly,” he said.
The tax rates were brought down in the last 18 months as revenues kept increasing, he pointed out. “Of the 1216 commodities which are used, broadly 183 are taxed at zero rate, 308 at 5%, 178 at 12% and 517 at 18%.” The Goods and Services Tax has also helped keep inflation and evasion in check, the minister claimed.
Jaitley said the Goods and Services Tax has been “at the receiving end of a lot of ill-informed and motivated criticism”. “Those who oppressed India with a 31% indirect tax and consistently belittled the GST must seriously introspect,” he added. “Irresponsible politics and irresponsible economics is only a race to the bottom.”
In its last meeting on Saturday, the Goods and Services Tax Council moved six items from the 28% tax bracket to 18%, and 16 items from 18% to 12% and 5% brackets. Last week, Prime Minister Narendra Modi had said his government would simplify GST to a point where more than 99% items come under a tax slab of 18% or lower.