India: 12% and 18% GST slabs may be merged; 28% slab to remain for demerit goods: Arvind Subramanian

  • The government may combine the 12% and 18% slabs for goods and services tax (GST) into one in the near future and reserve the 28% rate only for demerit goods, said chief economic adviser Arvind Subramanian.
  • While India will never move to a single GST rate, over time there would be a “poor man’s” rate (0% and 5%), a “core” rate (the 12%-18% combination), and the demerit rate (28%), Subramanian said during the course of a 90-minute interaction at the ET office.
  • Cement and white goods are not demerited goods, but the government was deliberately “going slow” on those items due to revenue considerations.
  • The chief economic adviser, who had proposed a revenue-neutral rate of 15.5% in 2016, said GST collections were not doing badly and the government would take a call on the overall fiscal situation in a few weeks.
  • “I never liked the 28% slab, which I think has created some of the transitional challenges. I think we are very close to making 28% just for demerit goods… 0% and 5% has quite a lot of the tax base and there I think we will not be able to make that much progress as we have to protect the poor. But the 12% and 18%, at some point, can be combined in the foreseeable future into one rate,” the chief economic adviser said, outlining the structure.
  • “In India, we will never get one slab. We have too much of a socialist mindset and for a good reason,” said the IIM-Ahmedabad and Oxford-educated Subramanian, whose tenure as CEA was recently extended by a year.

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