The NDA government seems to be working on introducing a “one nation, one tax” system through single Goods and Services Tax (GST) for most items in a bid to bring all goods and services under a single tax blanket and simplify the taxation format in India.
Following the GST cut after GST Council meeting last week, Finance Minister Arun Jaitley said that the government has suggested shifting to a single standard Goods and Service Tax rate. The shifting of a number of goods from the topmost 28% tax slab to 18% and a promise to bring 99% items out of the topmost slab is an evidence of the possible shift. As per Jaitley’s claims, the next stage of reforms of GST likely see the standard rate converging to around 15% – the midpoint of the existing standard rates of 12% and 18%.
If implemented, India would make a second major taxation transition after the recent “one commodity, one tax” system under which, most commodities would attract just one tax instead of current 17 possible taxes. But, these reforms will take time because the changes can be made only when the government is able to get “a significant rise in tax revenues”. And like Jaitley claims, the ultimate goal for the government is to have “a GST which will have only slabs of zero, 5% and standard rate with luxury and sin goods as an exception”.