Industry lobbies are backing the Congress Party’s demand that the standard rate of Goods & Services Tax (GST) should not be allowed to breach the 18 per cent mark as it would stoke inflation.
The demand was made during an interaction with the Empowered Committee of State Finance Ministers on Tuesday. They said higher rates could fuel price gains. The chambers of business also said they required sufficient time to put in place the IT infrastructure.
Reasonable rateA Federation of Indian Chambers of Commerce & Industry (FICCI) delegation led by its past president Harsh Mariwala sought a minimum of six months from the date of the adoption of the GST Law by the proposed GST Council to prepare for hassle-free roll-out of the new indirect tax regime. The delegation said it preferred a “reasonable” standard rate that would check inflation as well as evasion while ensuring compliance.
“For industry, which seeks to be competitive in the global marketplace, a standard rate of 18 per cent will be advantageous,” said Naushad Forbes, President, Confederation of Indian Industry (CII).
The CII is committed to the deadline of April 1, 2017 for the roll out of the GST, Mr. Forbes said.
The average standard rate of value-added tax in high-income countries is 16.8 per cent while that in emerging market economies is 14.1 per cent although rates in countries like China and Mexico are a little higher than this, he pointed out. “India should position itself correctly in order to boost exports and generate employment,” he said.
Assocham called for a relaxation in the penal and prosecution provisions in the first two years after the roll out of the GST except in case of tax fraud or non-deposit of collected taxes.
Chairman of the Empowered Committee and West Bengal Finance Minister Amit Mitra said that the concerns raised by the chambers would be looked into by the committee and the proposed GST Council, including the arrest and prosecution provisions. He sought suggestions on the quantum of penalties.
Centralised registrationAnother demand was that there should be single, centralised registration of suppliers of services operating across states rather than multiple, state-wise registrations.
