Moderate rate of GST may work: Finmin

Moderate rate of GST may work: Finmin

The finance ministry on Thursday said the proposed goods and services tax (GST) rate cannot be too low, unlike Japan and Singapore, in the scenario of tax leakages and exemptions.

“We have to keep in mind the ground reality and see them (rates) in the context of leakages," Parthasarthi Shome, adviser to the finance minister, said at a PHDCCI conference, a day after the value-added tax panel favours dual structure for GST—one at the state level and another at the Union government level.

Shome said Japan and Singapore had rolled out GST of 3-4% as leakages there are less. Lower rate for GST than the prevailing indirect taxes should be appreciated since the new system would make lives of taxpayers easier as there would not be multiplicity of taxes, as is the case now.

R. Sekar, joint secretary at the tax research unit, said the key to success is moderate tax rate on a broader base. There is great degree of consensus that GST would be introduced as per schedule on 1 April 2010, he added.