12%, 18% GST rates may be merged, says FinMin Jaitley

Finance Minister Arun Jaitley on Thursday hinted at merging the 12 per cent and the 18 per cent tax rates under the goods and services tax (GST), once revenue collections pick up and said the the top 28 per cent slab would be for a "very thin" list of luxury and sin goods.

Speaking at the HT Leadership Summit in the capital, Jaitley said the new indirect tax regime started with multiple rates in order to keep the tax incidence around the same level that existed pre-GST. While the country would eventually move to a twotier goods and services tax regime, how fast it could be done would depend on the revenue position of the government, he said. "We have thinned down the 28 per cent bracket, we can thin down more and it can be at some stage confined to luxury and demerit goods," Jaitley said adding that as GST collections improve, the govt would see if there is a scope for merging the 12 and 18 per cent slabs.

He said the merging of the 12 and 18 per cent slabs would mean some items in the 12 per cent bracket will be sent to the 5 per cent slab, resulting in two rates of 5 per cent and another 'X' per cent.

He said a single GST rate is possible only in countries which have similarly placed population andthat in a highly differentiated society like India it would have been inflationary. "Can you have a GST in India where a Mercedes car and a hawai chappal is taxed at the same rate? That's socially not acceptable," Jaitley said. \ He highlighted that before the implementation of the GST, on July 1, most of the goods, including geometry boxes, rubber bands and copy books were being taxed at 31 per cent. "So, temporarily we parked them at 28 per cent. I had thought it would take a lot more time to rationalise it but most of them have been brought down to 18 and 12 per cent now.

So, we have started the rationalisation ahead of schedule," he said. Jaitley also said there was a need to reduce the compliance burden on small and medium enterprises (SMEs).

Under the GST regime, 95 per cent of tax comes from four lakh assessees, who pay their taxes on time. "The noise comes from several other areas and I think there is a need for the millions (of businesses) who pay the balance five per cent tax to actually reduce the compliance burden on them.

“And I do consider that it is a legitimate noise. Therefore, reducing that compliance burden is something that is called for," the Finance Minister added.