India Inc demands 18% GST rate, govt non-committal

After 13 state assemblies ratified constitutional amendment enabling the roll-out of GST, the empowered committee of state finance ministers met here on Tuesday to deliberate on nitty gritties of taxation under the new regime and constitute a GST Council that will set up the GST rate.

India Inc insisted on a GST rate of 18% saying that this will improve tax buoyancy and remove distortions, but the government did not commit to any standard rate just yet. It, however, said that the GST rate will be such that does not pinch the common man.

“There is a fear in the minds of people that the GST will enhance tax rates. It is unfounded. By definition, the revenue neutral rate will be such that does not shoot up average price of goods and services,” Chief Economic Advisor Arvind Subramanian said.

The GST Constitutional Amendment Bill needs to be cleared by 16 states before it can be sent to the president for his approval. After that, a  GST Council will be set up to arrive on tax rates under new indirect tax regime. “We believe that a maximum rate of 18% as standard rate will be revenue neutral and ensure adequate tax buoyancy,” CII President Naushad Forbes said.

Ficci suggested a reasonable “standard rate”, which did not have any adverse impact on inflation and ensured compliance. “Goods fully exempted from the levy of excise duty and VAT by all the states should be categorised as exempted goods in the GST regime as well,” Ficci said.

Besides, industry chambers, software lobby group Nasscom, exporters’ body FIEO and the Confederation of All India Micro and Small Scale Industries were called for the meeting with the state finance ministers to give their inputs on taxation under the GST.

Confederation of All India Traders, Federation of All India Traders Associations, and the Bharatiya Udyog Vyapar Mandal also made their presentation and demanded that the Centre address their concern.

Apex exporters body FIEO suggested exemption from IGST/CGST/SGST on imported or domestic inputs used in exports. India Inc demanded the discretionary power of tax authorities should be minimised. Ecommerce companies wished to be out of the GST net.
Chairman of the Empowered Committee of State Finance Ministers and West Bengal Finance Minister Amit Mitra assured traders and industry chambers that their concerns would be looked into.

He asked the industry to give suggestions on the quantum of penalty and said the empowered committee and the GST Council will look at the arrest and prosecution provision.

West Bengal abruptly decided to defer its plan to ratify the constitutional amendment enabling rollout of GST without putting forth any reason.