The government is likely to merge the 12 percent and 18 percent slabs for Goods and Services Tax (GST) but will reserve the 28 percent rate for demerit goods like cigarettes, according to chief economic adviser Arvind Subramanian.
However, Subramanian also said that India will never move to a single GST rate and there would be a poor man's rate of 0 percent to 5 percent and a core rate of between 12 percent – 18 percent combination. The demerit rate of 28 percent will always remain, Economic Times reported.
Cement and white goods are also under the 28 percent tax slab although they do not fall into the category of demerited goods. But, the government is deliberately going slow on these items because of revenue considerations.
However, recent reports suggest that the government is likely to reduce GST rate on white goods like washing machines, air-conditioner (AC) and refrigerators from the current level of 28 percent in a bid to increase consumer demand and further boost economic growth.
This will be the next rationalisation move after the Centre slashed rates for fast-moving consumer goods and restaurants. Also, last week, the Union Cabinet had approved the creation of National Anti-profiteering Authority (NAA) under GST -- to ensure that benefits of reduction in the new tax rates are passed on to the end consumers with immediate effect.
Subramanian also said that the GST collections were not doing badly and the government would take a call on the overall fiscal situation in a few weeks.
"I think we are certainly heading in the right direction (on the GST structure)," said Subramanian.
According to reports, the revenue collected under the new tax regime in October was Rs 95,131 crore and an average revenue shortfall of states has come down to 17.6 percent.
In rupee terms, the revenue shortfall of all states has come down to Rs 7,560 crore in October from Rs 12,208 crore in August.
Earlier in September, the government had collected Rs 93,141 crore revenue under the GST.