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Revenue neutral rate
Stating that the Central government is determined to roll out GST from the next fiscal, Economic Affairs Secretary Shaktikanta Das has said expressed confidence that the revenue neutral rate (RNR) structure will be decided in November.
Stating that the Central government is determined to roll out GST from the next fiscal, Economic Affairs Secretary Shaktikanta Das has said expressed confidence that the revenue neutral rate (RNR) structure will be decided in November. "The rate structure on which there is a lot of discussion going on at the moment with the GST Council and also in the public domain... Will get resolved in the next meeting of GST Council in the first week of November.
Maybe, one or two sittings, it should come to a conclusion," Das said. "The rate has to be necessarily revenue neutral. You cannot have a rate structure where governments run into huge deficit... Therefore, GST rates are worked out in such a manner that bulk of commodities are under the standard rate, which is 18 per cent," he said.
The items which are very important, which are of use to a large cross-section of people and common man are pegged at 6 per cent, he said, adding that 6 per cent, 12 per cent, 18 per cent and a higher rate for demerit goods has been proposed. According to www.onlinegst.in, RNR is the tax rate that allows the government to receive the same amount of money despite changes in tax laws. In the GST regime, the revenue of the government would not be the same in comparison with the present tax structure due to tax credit mechanism, removal of cascading effect , or otherwise.
Therefore an adjusted tax rate is required to avoid reduction in revenue of the government. This adjusted rate is termed the RNR. It is the rate at which tax revenue will remain same, despite allowing input tax credit and other factor. For the determination of RNR, the National Institute Of Public Finance And Policy had undertaken the study on Revenue Implications of GST and Estimation of Revenue Neutral Rate.
NIPFP recommends that GST rate will be same as the combined central and state taxes on Goods at present but it should be lower than the combined central and state taxes on services. Thou this rate will cripple the trade and industry besides burdening the consumers. The GST Counsel is empowered to take final decision on the RNR including floor rate and bands, adds Onlinegst.in
