New Delhi: Finance Minister Arun Jaitley on Thursday indicated that the number of slabs of Goods and Services Tax (GST) could be pruned to just three.
The finance minister further added that the GST Council could consider merging the current slabs of 12% and 18% into one rate apart from reducing the number of items that are taxed at 28%.
“We started the rationalization (of GST rates) ahead of schedule. Future rationalization will depend on how the revenue moves. We have thinned down the 28% slab. Moving ahead, we will rationalize it further to probably keep only luxury items in the highest bracket,” Jaitley said.
“We need to consider if we have the scope of merging the 12% and 18% slabs and have an interim rate. We have the lowest rate at 5%, then this new merged rate and the very thin slab of 28%. Eventually, that will be the direction,” Jaitley said.
Jaitley further went on to add that banks with their left-over cash post-demonetisation will fund the medium and small-scale enterprises.
“Banks will fund SMEs and the informal sector from the leftover cash it received during demonetisation,” said the finance minister, while speaking at the Hindustan Times Leadership Summit.
The Union minister also said that the government is looking to focus on the informal as well as small-scale enterprises in the future.
The move gains significance as not only the business sectors, but also RSS —ideological mentor of the ruling BJP — has expressed concern over the newly implemented Goods and Services Tax harming enterprises in terms of revenue.
During his speech, Jaitley also identified that “the bulk of job creation in India comes from the informal sector”.
Keeping in mind this concern, the GST Council, in its 23rd meeting held in Guwahati, brought down the tax rates on a number of items.
At present, GST has five tax slabs — 0%, 5%, 12%, 18% and 28%. Besides these, a cess is also levied on some sin and luxury goods over and above the tax rate of 28%.
Among other developments, the minister also said that Indians need to be nudged to comply to economic norms and that the 5% income tax rate is a ploy to get people to start paying taxes.