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The standard rate of the Goods and Services Tax (GST) has to be “the average of tax rates on manufacturing and services”, said Chief Economic Advisor Arvind Subramanian.
While noting that the proposed GST Council would have the final say on the rate, he said: “The combined tax of 27 per cent is on manufacturing only…. You can’t just look at one component.”
Interestingly, the rates proposed by Subramanian in his report on ‘Revenue neutral rates for GST’ were used as one of the key arguments by the Congress party during the debate on the Constitution Amendment Bill to enable GST.
Subramanian had suggested that the standard GST rate should be kept at 17-18 per cent. However, this was not acceptable to States, which wanted the GST rate to be around 22 per cent.
Even Finance Minister Arun Jaitley has indicated that the tax rate should be lower than the current 27-32 per cent. “What the States are saying now, I think, is not the last word,” he said.
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