While the effective rate of indirect taxes under the new Goods and Services Tax (GST) regime still remains unclear, as fitment in tax slabs is under way, the Central Board of Excise and Customs (CBEC) has said that taxes were likely to “increase a bit” from the current level.
“That is our belief (that the current level of taxation will not lessen at least for first five years. It will be the same, that’s our belief, and it will increase a bit,” CBEC Chairman Najib Shah told IANS in an interview here.
Shah said that the fitment of goods and services in the four tax slabs — 5 per cent, 12 per cent, 18 per cent and 28 per cent — is a work in progress.
Apart from the tax rates, there will also be a cess on top of it, which will form the corpus to compensate the states for any revenue loss for the first five years of implementation of GST.
“The Council will determine the commodities which will have the cess. We will suggest, but all decisions will be taken by the Council because, after all, it is a question of revenue for the states and the Centre,” Shah told IANS.
“Rates is an issue that is sensitive and will be determined only by the Council,” he said.
Revenue Secretary Hasmukh Adhia recently announced that the Council has increased the cGST (central GST) and sGST (state GST) peak tax rate from 14 per cent to 20 per cent each, amounting to a peak rate of 40 per cent.
Though the current tax slabs will remain the same, the peak rate has been increased for future contingencies, Adhia had said.
CBEC Chairman also said that GST is being looked upon as bringing about a possible 1-2 per cent increase in GDP.
“Whenever we talk of GST, we talk of a possible increase in GDP by 1-2 per cent. That’s the sort of belief we have got, he said.
Where is that GDP going to come from?
He said that with the implementation of GST, tax evasion should come down as all filings will be IT driven and evasion will get difficult.
He also said the GST regime is likely to be rolled out by July 1.
The Chairman said that it will ensure that the laws regarding the new indirect tax regime are finalised by April 1, so that the industry has three months to prepare for the transition.
“That should give everybody time to adjust to the new requirements. We have trained 49,000 officers of the states and the Centre till last week. Goods and Services Tax Network (GSTN) — GST’s IT infrastructure arm — and CBEC together will now conduct trainings, so that people know how to file their returns,” he said.
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