Four slab rate structure for GST is better than a single rate: Arvind Panagariya

NITI Aayog, government's premier think-tank, has supported the four slab structure for GST besides arguing in favour of cess after several critics have questioned the proposed structure saying that it would dilute the original idea of a single unified rate.

"A four slab rate structure for GST is better than going in one go on to a single rate as in the latter price effect on specific products could be substantial," Aayog vice chairman and noted economist Arvind Panagariya said.

According to Panagariya, the revenues loss prospects under four slabs will be much less as opposed to the single rate, would be predictable and would give a better picture of what the unified rate could be going forward. "GST is a process and we are gradually heading towards it," he added.

The Centre has proposed a four-slab rate structure for the Goods & Services Tax, ranging from zero to 26%. The structure proposes the GST at 0 per cent on a host of goods and services, including food, health and education services, and at 26 per cent on luxury items, such as fast-moving consumer goods and consumer durables.

On consumption of ultra-luxury items and demerit goods, such as big cars and tobacco products, it proposes imposition of cess over and above a 26 per cent GST rate. The GST is proposed to be levied at 6 per cent, 12 per cent or 18 per cent on the remaining goods and services.

Further supporting the imposition of cess under GST, Panagariya said that it is temporary in nature and could be withdrawn anytime. "Centre has to compensate states for revenue loss. Keeping it separate from tax rate will mean that it can be withdrawn anytime," he added.

Commenting on whether the government will be able to meet the April 1 deadline for GST roll-out, Panagariya said government is working towards it and there is no reason why I should believe that it will not happen.

"It's a little bit of race against time but certainly well within the realm if possibility," he added.