GST: Compensation to states will have 5-year sunset clause

Detailing the first day of the council’s two-day meeting, Finance Minister Arun Jaitley said  the compensation to states will have a sunset clause of five years, even as the team will take a call every year to see if the same needs to continue. He said the items that will evoke nil tax comprise some 50 items that go into the basket of Consumer Price Index, while white goods and similar category of products -- like washing machines, air conditioners, refrigerators, shampoo, shaving stuff and soap, will have a rider. According to CK Ranganathan, CMD of CavinKare, the rates are just an indication. “The abatement aspect has to be factored. Are the rates applicable on sale price or MRP, that is something which is not clear? Ideally if 18 per cent is the slab assigned for our category, then it will nullify the other components and the government will also get equal amount of revenues. We need to see under which slab are we going to be placed.” V Pattabhi Ram, Partner, Yoganandh & Ram, explains, “The rates for the Goods and Services Tax Act are finally in.

The 4-slab-plate plan is a departure from the promised ‘uniform single rate’ cutting across goods and services. In the battle for a rate between 15 per cent and 28 per cent, we have seen a compromise. The FM appears to have said the weighted average will be below 18 per cent. My complaint against multiple rates is we should not end up with the pernicious practice of battling over which item falls under what category.” 

“With nearly across the board taxation on all the elements, it is perhaps time to drop direct taxes for individuals. In any case, 0.15 per cent of the population pays out 77 per cent of personal taxation. Also with expenditure tax (okay GST) at an average of 18 per cent, there should be no reason to hike further. Also, service tax is slated for a rise by 3 per cent points to 18 per cent.  Yes, the passing of GST would mean that India would tax-wise be one country. Otherwise, with each state having a multitude of rates, it looked as though we were the United States of India,” he sums up.