Top consultancy firm PwC has suggested the government to cut peak GST (goods and services tax) rate to 20-22 per cent from 28 per cent now while clubbing the two rates of 12 and 18 per cent and keep it somewhere between 14-16 per cent.
“While there has been a substantial reduction in the number of items under the 28 per cent bracket, the government should also consider reducing the rate from 28 per cent to around 20-22 per cent. Another simplification that can be considered is clubbing the 12 per cent and 18 per cent bracket at a more reasonable rate ranging between 14 per cent and 16 per cent,” the consultancy said in a report titled “Over 200 days of GST: the road ahead.”
Claiming that India has the highest peak GST rate among countries that have implemented similar tax regime, PwC noted that the multiple rate structure has complicated the taxation system leading to unwarranted disputes over classification. It added that the compensation cess levied on motor vehicles, tobacco and aerated drinks was in effect another layer of tax on these goods.
PwC asked if items such as ACs, refrigerators and cameras can be considered “luxury and sin goods” and levied a peak duty of 28 per cent. It made strong pitch for reviewing the definition of “luxury” by policymakers in the light of standards of living in today’s world.