GST slab rejig proposal: Rate hike an easier but not desirable option, says Pratik Jain

The Goods and Services Tax (GST) Fitment Committee has proposed raising the slab of 5 percent to 7 percent and 18 percent to 20 percent, sources informed CNBC-TV18. The feasibility of merging 12 percent and 18 percent to a single slab at 17 percent is, however, yet to be examined, sources said.

However, the Group of Ministers (GoMs) is yet to deliberate on the changes in rate slabs and will likely meet on November 27 to finalise their views.

When asked if we are headed towards a more revenue-neutral rate, and whether the 5 percent becoming 7 percent, and 18 percent becoming 20 percent, would achieve that, Pratik Jain, Partner, Price Waterhouse & Co, LLP, said, “I think that increasing the tax rate, whether it is 5 percent to 7 percent or 18 percent to 20 percent is an easier option, but perhaps not desirable. I think that a lot of discussions will happen in the GoM. When we talk about rationalisation, we talk about merging 4 percent to 3 percent, then 5, 12, 18 and 28 percent either becoming 6, 17 and 28 or 7, 16 and 28 percent. If we just increase the tax rate without merging the tax slabs, then that will perhaps not be in line with what the GoM has been constituted for,” said Jain.

He told CNBC-TV18 that the revenue-neutral rate itself is something of a misnomer in many ways, because the revenue-neutral rate that was there a few years ago and the one now could be different.

: Exclusive: Fitment committee proposes raising GST slab of 5% to 7% and 18% to 20%

GST collections have been increasing over the last six months. In most of the months it is more than Rs 1 lakh crore, and this has happened despite the rate reduction, he said.

Also Read: India should look at a GST rate structure with 2 or 3 slabs: Deloitte's MS Mani

“My take on this is that this is just the initial discussion happening in the GoM. Till now, the GoM has been focused on inverted duty structure to my mind, and these discussions have not come forth. It will take time to do the sectoral analysis, look at the products, etc. and the impact (of all these) on inflation before you take a decision. But I would want to see a three-tier structure and not necessarily a rate increase,” said Jain.