Economy

GST regime must have minimal exemptions, fewer rates: IMF

Surabhi Washington DC | Updated on January 27, 2018 Published on October 12, 2017

BL05_PG6_INDIA-ECONOMY-TAXATION

Says corporate tax rate should also be low with broader base, fewer exemptions

The International Monetary Fund has lauded New Delhi’s recent efforts to lower the compliance burden under the Goods and Services Tax, but said that efforts should also be made to lower the tax slabs and minimise exemptions.

“GST is an important reform. It has had some teething issues. The GST Council’s decision to lower the compliance costs is a good move…,” Ranil Salgado, Assistant Director, Asia and Pacific, IMF, told BusinessLine.

However, there is also scope to simplify the tax structure and bring down the number of tax rates, he added.

His comments come soon after the GST Council in its meeting on October 6 increased the threshold for the composition scheme and allowed more businesses to file quarterly returns under GST in order to simplify the tax scheme for small firms.

The IMF also called for further broadening the tax base and including all sectors under GST.

“The objective of GST should be to have a broader base with minimal exemptions. At present, electricity and fuel are out of GST, which creates issues for companies in the sector as they do not get input tax credit,” said, Andreas Bauer, Senior Resident Representative for India, IMF, adding that reducing the number of rates under GST over the medium term will also simplify the tax.

Finance Minister Arun Jaitley has also spoken about reducing the tax slabs under GST once tax collections reach “revenue neutral plus”.

The current model of GST with numerous exemptions and a four-tier rate structure — five per cent, 12 per cent, 18 per cent and 28 per cent — apart from a compensation cess and exempt items and different rates for gold (three per cent) and rough diamonds (0.25 per cent), is very different from the original plan of one single tax rate.

Direct taxes

The IMF officials, who deal with India, also called for broadening the corporate tax base and reducing exemptions.

“The IMF has supported the government’s move to lower the corporate tax rate and bring it down to 20 per cent. There is scope to simplify the corporate tax and reduce exemptions,” Bauer said.

Salgado agreed and said that removal of exemptions will improve transparency of tax laws and also reduce disputes.

(The writer is in Washington DC as part of the IMF Journalism Fellowships 2017 to cover the annual meetings of the IMF and World Bank.)

Published on October 12, 2017

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.