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Chief Economic Advisor Arvind Subramanian, in his report on the Revenue Neutral Rate and Structure of Rates for the Goods and Services Tax, has suggested that the exemptions list should be narrowed and restricted to a few goods such as food items consumed by the poor.
His full report, which was submitted to the Finance Minister on December 4 but made public on Wednesday, also calls for trimming exemptions to a common list between the Centre and States. It further suggests that the exemptions be confined to final goods as taxes on intermediates can be claimed as input credit. Phasing out area based and countervailing duty exemptions as well as exemptions on precious metals have also been proposed.
The CEA has recommended a revenue neutral rate of 15-15.5 per cent and standard rate between 16.9 per cent and 18.9 per cent. His calculation, though based on the indirect tax turnover approach used by the National Institute of Public Finance and Policy, uses data of States too.
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