GST will come on time, but multiple rates will dilute
benefits
India moved a step closer to creating a national sales tax but a deal on rates reached on Thursday will hit some businesses harder than others, while its complexity will dilute any boost to growth and undermine its reliability as a revenue generator. The Goods and Services Tax (GST), due to be rolled out from April 1, 2017, had been billed as the one reform that could help Prime Minister Narendra Modi deliver on his jobs and growth agenda. In a key Modi win, parliament amended the constitution in August to clear the way for the GST, which would unify Asia's third-largest economy into a common market for the first time. But Thursday's bargain between Finance Minister Arun Jaitley and his counterparts from India's 27 state governments has exposed the difficulties of dealing with so many stakeholders. The GST Council, set up to oversee the tax, agreed on a more steeply progressive structure for goods than earlier foreseen with rates of 5, 12, 18 and 28 percent, depending on the kind of product involved. The top rate, FM said, would apply to the kind of goods bought by middle-class Indians. On top of that, essentials like grains that make up half the consumer price index would not be taxed at all. Finally, a "cess" - a separate central tax - would be added to the top 28 percent GST rate on luxury cars and harmful products like tobacco and fizzy drinks. The total burden of this "sin" tax still has to be worked out, as does the rate applying to services that are now taxed at a rate of 15 percent.
Source-moneycontrol
India moved a step closer to creating a national sales tax but a deal on rates reached on Thursday will hit some businesses harder than others, while its complexity will dilute any boost to growth and undermine its reliability as a revenue generator. The Goods and Services Tax (GST), due to be rolled out from April 1, 2017, had been billed as the one reform that could help Prime Minister Narendra Modi deliver on his jobs and growth agenda. In a key Modi win, parliament amended the constitution in August to clear the way for the GST, which would unify Asia's third-largest economy into a common market for the first time. But Thursday's bargain between Finance Minister Arun Jaitley and his counterparts from India's 27 state governments has exposed the difficulties of dealing with so many stakeholders. The GST Council, set up to oversee the tax, agreed on a more steeply progressive structure for goods than earlier foreseen with rates of 5, 12, 18 and 28 percent, depending on the kind of product involved. The top rate, FM said, would apply to the kind of goods bought by middle-class Indians. On top of that, essentials like grains that make up half the consumer price index would not be taxed at all. Finally, a "cess" - a separate central tax - would be added to the top 28 percent GST rate on luxury cars and harmful products like tobacco and fizzy drinks. The total burden of this "sin" tax still has to be worked out, as does the rate applying to services that are now taxed at a rate of 15 percent.
Source-moneycontrol
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