India Today - - OPINION -

A con­sen­sus on GST rates. Con­gress­run states are push­ing for a stan­dard rate of 18 per cent. ‘Con­sumer’ states are keen on a rate above 16%, while ‘man­u­fac­tur­ing’ states want it to be much higher A de­ci­sion is needed on sep­a­rate rates for dif­fer­ent cat­e­gories of goods and ser­vices—‘ba­sic’ and ‘lux­ury’ The list of goods and ser­vices ex­empted from GST is prov­ing con­tentious. Cur­rently, some 300 items are ex­empted Fi­nal­i­sa­tion of the rules and pro­ce­dures of reg­is­tra­tion, in­voic­ing and pay­ment who has helped coun­tries like Canada draft their own GST laws, ex­plains: “Even for sec­tors that are not ex­cluded from the GST, the govern­ment has im­posed re­stric­tions on credit avail­able. For in­stance, in­put costs in con­struc­tion are out­side the purview of in­put credit. The sale of build­ings— real es­tate, es­sen­tially—is also out of the GST. That in­cludes fac­to­ries, tele­phone tow­ers, shop­ping malls... any im­mov­able prop­erty. Any ad­di­tional fix­tures in that build­ing, from light­ing to el­e­va­tors, will not be al­lowed for claim­ing in­put tax credit ei­ther.” The scale of the prob­lem is quite large too. “If to­tal in­vest­ment is 30 per cent of the GDP,” he says, “one third of that is con­struc­tion. If Rs 30 lakh crore is the to­tal spend­ing by in­dus­try and busi­nesses, Rs 8 lakh crore was on ac­count of con­struc­tion. This has been kept out of the purview of GST.” An­other con­tentious point has been raised by the au­to­mo­tive in­dus­try: firms are grap­pling with the var­ied bas­kets of tax be­ing con­sid­ered, specif­i­cally 40 per cent for lux­ury cars. There is some am­bi­gu­ity on how ‘lux­ury’ has been de­fined, and also on whether poli­cies that had been in­tro­duced by the states to bring in in­vest­ment will con­tinue.

While the Cen­tral govern­ment has as­sured the states of com­pen­sa­tion for any rev­enue loss in the next five years, it will also have to be mind­ful of keeping a rate that is not too high to cover its rev­enue losses. A fer­vent pitch by Ajit Ranade of the Aditya Birla Group in­di­cates the need to place a leg­isla­tive ceil­ing on the in­di­rect tax rate, to curb the ten­dency of fu­ture gov­ern­ments to qui­etly in­crease rates. “We have to get ba­sic prin­ci­ples right,” he says. “Let’s not get car­ried away by the tax rate. Fix a low enough rate now and re­im­burse the short­fall.” Pod­dar cites the ex­am­ple of New Zealand, which be­gan with a 10 per cent rate, which has now inched up to be­tween 14-15 per cent, and also the fact that there are no ex­emp­tions. Aus­tralia, South Africa and Sin­ga­pore do have some ex­emp­tions, but they are de­fined clearly to avoid clas­si­fi­ca­tion dis­putes of this kind.

There needs to be a recog­ni­tion of the fact that as trans­ac­tions

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