The goods & services tax (GST) regime, which is aimed at simplifying India’s myriad indirect tax system, may not be as simple after all. While state governments have already decided on a multiple rate structure, the Centre is also considering dual rates under the new regime.

The rationale behind the proposal is to ensure equitable taxation of goods via dual rates rather than a uniform rate on all products. “Excise duty is levied on all manufactured goods—from food items and machinery to medicines. Ideally, you shouldn’t levy excise duty at the same rate on all these goods,” a finance ministry official said.

Officials, however, said the Union finance ministry is currently studying this option and that a final decision would only be taken after October 8 when the empowered committee of state finance ministers meet Union finance minister Pranab Mukherjee to discuss their road map for GST.

The proposal, if accepted, would be a significant shift in the Centre’s stand on GST, which has been keen on a single rate for all goods, both at Central and state levels. Gearing up for GST rollout from next fiscal, Mukherjee had in this year’s Budget converged central excise rates to a mean of 8 per cent by reviewing items taxed at 4 per cent.

Earlier this month, state governments not only agreed to multiple rates under GST, but also finalised the rate structure. While those rates are yet to be announced, officials said the standard state GST rate would be 8-9 per cent, with a lower rate of between 3 per cent and 5 per cent. There would be a separate 1 per cent rate on precious metals, and a list of exempted commodities is also in the making.

... contd.