GST: tax rate likely to be higher than 18%

The decision will be taken by GST Council, comprising Union and State Finance Ministers: Adhia.

A customer hands a bundle of Indian Rupee currency notes to a teller at a financial institution in Mumbai July 2, 2013. Concerned about the rupee's fall to a record low, the Reserve Bank has discreetly phoned trading desks with unusually explicit messages to cut their speculative positions in the currency, said three senior market participants with direct knowledge of such calls. REUTERS/Vivek Prakash (INDIA - Tags: BUSINESS)

A day after the Bill to amend the Constitution was approved by the Rajya Sabha, paving the way for the Goods and Services tax (GST), the Centre seemed to concede that the rate at which the new indirect tax will be levied on most goods is likely to be higher than 18 per cent.

While the decision would be taken by the GST Council, comprising the Union and State Finance Ministers, proposed to be set up after the process of amending the Constitution is completed, Revenue Secretary Hasmukh Adhia told a press conference that it would be “premature” to expect the standard GST rate to be 18 per cent, much lower than the combined excise duty and value-added tax.

No inflationary impact: Jaitley

The challenge of the goods and services (GST) tax roll-out, Union Finance Minister Arun Jaitley said was to meet the twin objectives of keeping the rates for the indirect tax at levels that won’t hurt the poor and at the same time avoid dips in revenues for States and the Centre: “What we need is an optimal (GST) rate.”

Addressing a press conference here on Thursday, Mr. Jaitley sought to allay fears on the GST’s impact on inflation, saying an uptick in prices was unlikely even if the rate is kept at 20 per cent.

One of the key demands over which the main Opposition party, the Congress, had held back its support to the Bill, leading to it getting stuck for months in the Rajya Sabha, was that the GST rate applicable to most goods and services be capped at 18 per cent. The party voted in favour of the Bill on Wednesday, saying it would insist the rate be capped in the GST legislations.

Revenue Secretary Hasmukh Adhia told the press conference that hectic preparations were under way, including by States, for rolling out the GST by the target deadline of April 1, 2017.

Mr. Jaitley said the Centre was aiming for the new indirect tax to be implemented from 1 April 2017. “As reasonably quick as possible... It is always good to set a stiff target,” he said. The Revenue Secretary said the target was for 17 of the States to ratify the constitutional change within 30 days.