4-tier GST rate may lead to classification disputes: NIPFP economist

 

LATEST NEWS – The four-tier GST rate structure will open up floodgates of classification disputes with a tendency among businesses to demand lower rate for their goods or services, says a research paper.

Four tax rates have been proposed under the Goods and Services Tax regime that is to introduced later this year.

“Present discussion on two standard GST rates (12 per cent and 18 per cent), a lower rate (5 per cent) and a higher rate (28 per cent) in addition to exemptions will make the design of GST complicated and increase the cost of compliance as well as cost of tax administration,” said NIPFP associate professor Sacchidananda Mukherjee.

“It is expected that, if accepted, the proposal will open up floodgates of classification disputes and there will always be a tendency among businesses to demand lower rate for their good or service,” he said in the paper posted on NIPFP website.

Voices are being raised already to put plantation crops, labour intensive manufacturing, infrastructure inputs and air fares under lower tax bracket, he said.

“It is expected that the higher the differences among the tax rates the larger will be the scope for litigation. The benefits of removal of cascading of taxes will be balanced by a higher cost of compliance, as a result the expected benefits of the introduction of GST may not be achieved,” Mukherjee noted. READ MORE

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