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Industry bodies call for eventual streamlining of multiple GST rates

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Industry bodies have raised concerns over the government’s proposed multiple rate structure for the Goods and Services Tax regime, saying that the four proposed rates should eventually be collapsed into fewer rates.

 They also called for a clear roadmap for the withdrawal of the cesses the government proposes to levy on luxury goods and tobacco products over and above the 26 per cent GST rate.

“The GST should begin with an absolute limit of four rates as suggested by the Government, and over time, the Government should commit to converging these four rates to one or two rates,” Chandrajit Banerjee, Director General, CII said on Wednesday, a day before the fourth meeting of the GST Council.

He added that industry was cognisant of the fact that a single GST rate could not apply in a country like India and so a beginning must be made with multiple rates.

“It is suggested that the higher rate of 26 per cent should apply only to ‘demerit goods’ and the term “luxury” goods should not be used to define this category,” Mr Banerjee said, adding that the bulk of goods and services should fall within the standard rate of 18 per cent and only a few exceptions should be taxed at the higher rate of 26 per cent.

“The government should also roll out a clear roadmap for the early withdrawal of cess once the buoyancy in tax collection becomes adequate to compensate the states for any shortfall that they might have,” Mr Banerjee said.

The industry bodies also voiced some sector-specific demands in the run up to the fourth meeting of the GST Council.

“The (textiles) industry players expect a tax efficient GST regime in the form of various incentives such as continuation of zero rating of exports along with a streamlined and efficient refund mechanism; liberalisation of credit regime allowing full credit to eliminate inverted duty structure and cascading effect; uniform tax structure to eliminate tax differentiation and tax arbitrage amongst various states; and higher rate of duty drawback to encourage increase in production of textile and apparel products for export,” according to a report by Assocham and KPMG.

The report also mentions the need to revisit several complications in the taxation structure of the telecom sector, saying that there were several issues here such as the proposed shift from the levy of circle-wise tax to a levy of state-wise tax, the classification of services and goods, and the taxability of SIM cards and recharge coupons, to name a few.

“Petroleum products and alcohol are the main drivers and ingredient to the tourism industry,” the report added. “The Government under the proposed GST structure has proposed to keep both the products outside the purview of GST. Therefore, either a special abatement should be provided to balance the incremental costs or the same should be covered in the proposed structure of GST.”

-Source:- http://www.thehindu.com/business/industry-bodies-call-for-eventual-streamlining-of-multiple-gst-rates/article9296379.ece

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