India Inc bats for 20% GST rate as bill goes for LS approval

Industry bodies are batting for a moderate 20 per cent levy of the proposed Goods and Services Tax (GST) that will replace a plethora of central and state levies on goods and services transactions in the country.

Ahead of the expected passage, of the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014, which would pave way for a Goods & Services Tax (GST) regime, the Associated Chambers of Commerce and Industry (Assocham) has called for a 20-per cent upper limit for the GST rate.

The implementation of GST regime, touted as the biggest tax reforms in post-Independence India, the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014, relating to Goods & Services Tax (GST) is expected to be passed by a majority consensus in the Lok Sabha today.

The bill was unanimously passed in the Rajya Sabha last week, after AAIDMK MPs opposed to the bill walked out of the House. (See: Rajya Sabha clears GST bill; AIADMK stages walkout).

The amendments made by Rajya Sabha in the Constitution (One Hundred and Twenty Second Amendment) Bill, 2016 as passed by Lok Sabha and as reported by the Select Committee of Rajya Sabha, have been now been taken up by the Lok Sabha.

A large section of India Inc wants to keep the standard GST rate below 20 per cent, and services like telecom, banking, healthcare and railways to be included in the 'merit' list to keep inflation in check.

''No tax reform can succeed unless adequate revenue generation is assured to both the centre and states. Likewise, in the case of GST, the revenue neutral rate (RNR) should be worked out, taking into account the tax buoyancy and all out efforts must be made in this direction,'' Assocham secretary general D S Rawat said.

The RNR is the rate at which there will be no revenue loss to either centre or the states in the Goods and Services Tax (GST) regime.

Besides, doing away with levies like octroi and entry tax at the inter-state borders would bring in a huge amount of operational efficiencies that in turn should have a positive implication for the transaction cost, the chamber said.

''Our assessment shows that the industry can live with GST benchmark rate of a band of 17-20 per cent. Anything above that will be counterproductive and lead to inflation, especially on the side of services,'' Rawat said.

''Besides, the most important stakeholders in the entire process of reforms are the people of India, who should savour the pudding (as its proof)... and then will surely support the entire gamut of economic reforms.''

While it is true that the states have concerns over the possible revenue loss, but once tax buoyancy takes place due to GDP growth, operational efficiency and more people getting into the mainstream, it is going to be a win-win situation even for the states, the chamber said.

It further said the work needs to be done on a war footing in the next seven months to fix each and every problem that may crop up.

As far as possible, no sector of the economy should feel GST as a problem, instead it should be welcomed as a major solution to the complexities in the Indian paradigm, it noted.