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Policymakers do not have ‘fetish’ to raise tax rates to revenue-neutral level of 15.5%: Revenue Secretary

Under the GST, a four-rate structure that exempts or imposes a low rate of tax of 5 per cent on essential items and a top rate of 28 per cent on cars is levied

Revenue Secretary Tarun Bajaj has said that the rate rationalisation exercise of the GST Council is a result of introspection of GST, and policymakers do not have a ‘fetish’ to raise the tax rates to the revenue-neutral level of 15.5 per cent. He said the government intends to continue with the top GST slab of 28 per cent for luxury and sin goods. But, he said the government is open to discussing narrowing down the three slabs of 5, 12 and 18 per cent into two. On the industry demand for bringing petroleum products under GST net, he said since fuel constitutes a larger part of their revenues, both the Centre and states have some apprehension.

Bajaj said ‘we will have to wait for some time. Of the 5, 12, 18 and 28 per cent, we would have to continue with 28 per cent because in a developing economy, in an economy with so much of income disparity, there would be some luxury and sin items that would and should attract a higher rate of taxation. But, whether on 5, 12 and 18 (per cent), we can bring down to 2 rates to start with and then see how the country grows and whether there is a capacity to bring it to one rate or not is something to be seen. It is a very difficult challenge.’

Under the GST, a four-rate structure that exempts or imposes a low rate of tax of 5 per cent on essential items and a top rate of 28 per cent on cars is levied. The other slabs of tax are 12 and 18 per cent. Besides, there is a special 3 per cent rate for gold, jewellery and precious stones and 1.5 per cent on cut and polished diamonds. Also, a cess is levied on the highest tax slab of 28 per cent on luxury, sin and demerit goods. The collection from the cess goes to a separate corpus -- Compensation fund -- which is used to make up for revenue loss suffered by the state due to the GST rollout.