India Insight:Fixing the GST rate

Consensus reached on GST rate structure: The GST Council has finalisedGST rate slabs of 5%, 12%, 18% and 28%. The approved 4-tier GST ratestructure instead of a single-tax rate could complicate implementation andlead to classification and exemption disputes, thus reducing efficiency gains,in our view. That said, we believe that a multi rate tax structure still worksbetter for India considering the income disparity in the economy and in orderto keep inflationary pressures under control. However, the policymakersshould strive towards a single-rate GST as a medium-term goal to facilitatecompliance and administration, in our view. We believe a consensus reachedon tax slabs is a step in the right direction and increases the probability offurther GST legislation (the Central GST or CGST and Integrated GST orIGST) being passed in the upcoming winter session of the parliament (startingmid-Nov), thus paving the way for implementation of GST next year.

    Details of the proposed rate structure: The GST Council hasrecommended 4tax brackets