The government may combine the 12 per cent and 18 per cent slabs for goods and services tax (GST) into one in the near future and reserve the 28 per cent rate only for demerit goods, said chief economic adviser Arvind Subramanian.
While India will never move to a single GST rate, over time there would be a “poor man’s” rate (0 per cent and 5 per cent), a “core” rate (the 12 per cent-18 per cent combination), and the demerit rate (28 per cent), Subramanian said during the course of a 90-minute interaction at the ET office.
Cement and white goods are not demerited goods, but the government was deliberately “going slow” on those items due to revenue considerations. The chief economic adviser, who had last year proposed a revenue-neutral rate of 15.5 per cent, said GST collections were not doing badly and the government would take a call on the overall fiscal situation in a few weeks. “I think we are certainly heading in the right direction (on the GST structure),” Subramanian said.
“In India, we will never get one slab. We have too much of a socialist mindset and for a good reason,” said the IIM-Ahmedabad and Oxford-educated Subramanian, whose tenure as CEA was recently extended by a year. Subramanian said land, real estate and natural gas could soon come within the purview of GST, and added that he supported the early inclusion of electricity as well. “Last time, land and real estate were on the agenda of the GST Council, but we couldn’t discuss it.