GST regime must have min­i­mal ex­emp­tions, fewer rates: IMF

The Hindu Business Line - - NEWS - SURABHI

The In­ter­na­tional Mone­tary Fund has lauded New Delhi’s re­cent ef­forts to lower the com­pli­ance bur­den un­der the Goods and Ser­vices Tax, but said that ef­forts should also be made to lower the tax slabs and min­imise ex­emp­tions.

“GST is an im­por­tant re­form. It has had some teething is­sues. The GST Coun­cil’s de­ci­sion to lower the com­pli­ance costs is a good move…,” Ranil Sal­gado, As­sis­tant Di­rec­tor, Asia and Pa­cific, IMF, told Busi­nessLine.

How­ever, there is also scope to sim­plify the tax struc­ture and bring down the num­ber of tax rates, he added.

His com­ments come soon after the GST Coun­cil in its meet­ing on Oc­to­ber 6 in­creased the thresh­old for the com­po­si­tion scheme and al­lowed more busi­nesses to file quar­terly re­turns un­der GST in or­der to sim­plify the tax scheme for small firms.

The IMF also called for fur­ther broad­en­ing the tax base and in­clud­ing all sec­tors un­der GST.

“The ob­jec­tive of GST should be to have a broader base with min­i­mal ex­emp­tions. At present, elec­tric­ity and fuel are out of GST, which cre­ates is­sues for com­pa­nies in the sec­tor as they do not get in­put tax credit,” said, An­dreas Bauer, Se­nior Res­i­dent Rep­re­sen­ta­tive for In­dia, IMF, adding that re­duc­ing the num­ber of rates un­der GST over the medium term will also sim­plify the tax.

Fi­nance Min­is­ter Arun Jait­ley has also spo­ken about re­duc­ing the tax slabs un­der GST once tax col­lec­tions reach “rev­enue neu­tral plus”.

The cur­rent model of GST with nu­mer­ous ex­emp­tions and a four-tier rate struc­ture — five per cent, 12 per cent, 18 per cent and 28 per cent — apart from a com­pen­sa­tion cess and ex­empt items and dif­fer­ent rates for gold (three per cent) and rough di­a­monds (0.25 per cent), is very dif­fer­ent from the orig­i­nal plan of one sin­gle tax rate.

Direct taxes

The IMF of­fi­cials, who deal with In­dia, also called for broad­en­ing the cor­po­rate tax base and re­duc­ing ex­emp­tions.

“The IMF has sup­ported the gov­ern­ment’s move to lower the cor­po­rate tax rate and bring it down to 20 per cent. There is scope to sim­plify the cor­po­rate tax and re­duce ex­emp­tions,” Bauer said.

Sal­gado agreed and said that re­moval of ex­emp­tions will im­prove trans­parency of tax laws and also re­duce dis­putes.

(The writer is in Wash­ing­ton DC as part of the IMF Jour­nal­ism Fel­low­ships 2017 to cover the an­nual meet­ings of the IMF and World Bank.)

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.