GST rate will be much more diluted than 27%: Jaitley

GST rate will be much more diluted than 27%: Jaitley

The GST rate will be "much more diluted" than the speculated 27 per cent and the final rate will be worked out by the GST Council, Finance Minister Arun Jaitley said today.

"I straightaway concede that 27 per cent would be very high...after this 27 per cent (Revenue Neutral Rate) was born, the states and the Centre have decided to keep alcohol out," he said in a reply to GST Bill debate in the Lok Sabha.

"We have decided to keep petroleum out and every state finance minister is not interested in imposing higher taxes on its own people, and neither the central government. Therefore, this figure (RNR) is going to much more diluted compared to the figure (27 per cent) which has been mentioned," he said.

Revenue Neutral Rate (RNR) is the rate at which there will be no revenue loss to the states after GST implementation.

"These are the figures which would be decided by GST Council," he added.
The GST Council will have Jaitley as its Chairman and comprise two-third of members from states and one-third from the Centre.

GST is termed as the biggest indirect tax reform since 1947. A single rate GST will replace central excise, state VAT, entertainment tax, octroi, entry tax, luxury tax and purchase tax on goods and services to ensure seamless transfer of goods and services.

Allaying concerns raised by some of Lok Sabha members regarding the 27 per cent RNR speculation, Jaitley said "it is going to be too high and therefore the cost and prices itself will go up".

He clarified to the House that the number was not given by the government or the GST Council but by a particular organisation in its own internal assessment.

"It got leaked out and somebody said it is 26.8. so that is how this figure of 27 per cent was born," he said.

However, without hazarding a guess as to what the final GST rate would be, Jaitley said, the 13th Finance Commission had suggested 18 per cent as a possible figure. 

About the suggestions made by the Standing Committee on Finance on the GST Bill, Jaitley said the model proposed by it was in line with 'cooperative federalism'.

Emphasising the government's commitment to cooperative federalism, Jaitley said, "federalism means strong states, it does not mean a weak Centre".

Appreciating the model suggested by the Committee for keeping cooperative federalism intact, he said it suggested "one third power with the centre, two third with the states" to compel them to work together. They said every decision would be by three-fourth majority.

To reach the three-fourth point, both centre and states would have to work together, he said.

This model of one third and two third has to integrate in order to reach to three-fourth, he added.  

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