28% GST slab to be phased out, except for these things

Finance Minister Arun Jaitley on Monday hinted that the country may eventually have a single standard rate of GST through merging of 12 and 18 per cent slabs, adding that the 28 per cent slab will soon be phased out, except in case of luxury and "sin goods".

He said the country should eventually have a Goods and Services Tax (GST) structure which would have only slabs of zero and five per cent and a standard rate, with luxury and "sin goods" as an exception. "A future roadmap could well be to work towards a single standard rate instead of two standard rates of 12 per cent and 18 per cent. It could be a rate at some mid-point between the two. Obviously, this will take some reasonable time when the tax will rise significantly," Jaitley said in a Facebook post.

Regarding the highest tax slab of 28 per cent, the Minister said with the GST transformation completed, India was close to completing the first set of rate of rationalisation by phasing out the highest slab except in luxury and sin goods. "The sun is setting on the 28 per cent slab... Today, barring tobacco products and some luxury goods, almost all items had been transferred from 28 per cent slab to 18 and 12 per cent. 

"Only cement and auto parts are items of common use which remain in 28 per cent slab. Our next priority will be to transfer cement into a lower slab. All other building materials have already been transferred to 18 and 12 per cent... The 28 per cent slab is now a dying slab," he said. Attacking the Congress and other opposition parties, Jaitley said their criticism of the GST was "ill-informed" and "motivated".

He said during the pre-GST regime, a large number of commodities were taxed heavily and that the Congress legacy was a 31 per cent indirect tax. "Those who oppressed India with a 31 per cent indirect tax and consistently belittled the GST must seriously introspect. Irresponsible politics and irresponsible economics is only a race to the bottom," he added.

Jaitley said the political noise outside the GST Council was inconsistent with the harmony inside as at its 31 meetings, the body has "behaved with utmost responsibility" taking several thousand decisions unanimously and with consensus.  eferring to the government falling short of the collection targets, the Minister said the targets set in the GST regime were unprecedentedly high, with a 14 per cent increase over 2015-16 tax collections guaranteed. 

"Thus, even when 18 months have not been finished since the launch of GST, on this day every state has a target of improving its revenue with three 14 per cent increases compounded annually over the base year of 2015-16. This is close to a 50 per cent being reached in the second year itself," he said.

"It is almost an unachievable target. Yet six states have already achieved it, another seven are within a striking distance of achieving it and only 18 are still more than 10 per cent away from achieving it."  Jaitley said that those states which do not achieve the target of 14 per cent are paid out of the compensation cess. 

"The requirement of compensation cess in the second year is expected to be much lower than the first year," he said, adding the average monthly tax collected in the first year was Rs 89,700 crore as compared to Rs 97,100 crore per month in the second year. "This increase in the tax collection has to be factored keeping in mind the significant rate reduction which has taken place in the GST" which amounts to about Rs 80,000 crore per year, he said.