Accounting for India's Forest Wealth - Madras School of Economics

tobacco products. Following the consumption expenditure method sheobserves that the rate of GST required for revenue neutrality would be20 percent. With improved tax administration, the GST rate can bereduced further.The Task Force of the Thirteenth Finance Commission hasestimated with reference to a comprehensive tax base (as discussed inthis chapter) a revenue neutral rate of 12 percent, with 5 percent for thecentre, and 7 percent for the states.Overtime the relative share of the GST components for thecentre and the states have been changing marginally away from thecentre due to the erosion of buoyancy of Union excise duties (seeAppendix Table A2).The Task Force has recommended a single positive rate, each forCGST and SGST on all goods and services. In addition, there should be azero rate applicable to all goods and services exported out of the country.The Task Force favours a single rate structure GST and someinternational experience with VAT in support. States have said that asingle rate of State GST for all goods and services will be highlyregressive in India with its large low income population. It is mainly thearticles of common consumption which are in the lower rate bands ofVAT. The single revenue-neutral rate will definitely be much higher thanthe rate now prevailing at the lower bands. To deal with problem, theTask Force suggests a moderate threshold exemption level forregistration of dealers. Consequently, all small dealers would remainoutside the purview of the GST. The Task Force Report argues that thetax incidence on products sold through such dealers would be relativelylower. Since the poorer section of the society tend to make theirpurchases from such small and unregistered dealers, the consumption ofany commodity by the poor would bear a relatively lower incidence of tax24