The development came after top NDA leaders are said to have touched base with the Congress leadership to arrive at a consensus decision on the much-stalled tax reform.
The chief economic advisor Arvind Subramanian today made a presentation in a meeting headed by Finance Minister Arun Jaitley and revenue secretary Hasmukh Adhia and other finance ministry officials on the government's plan to lower the GST rate to a more acceptable level.
The presentation was on arriving at a "revenue neutral rate" for GST. A revenue neutral rate in economic terms means a tax percentage at which the revenue earned in future is the same as the revenue which all the taxes subsumed into GST used to get in the past.
Speaking to NDTV, Jayanth Sinha Minister of State for Finance said, "The committee headed by Mr Subramanian has collated all the data and work is on to arrive at a least possible rate."
The government has fast tracked the discussions on GST. The revenue secretary Hasmukh Adhia said, preliminary discussions are on and lot of data has been collected. The report of the committee headed by the Mr Subramanian will be submitted by the first week of December."
The government's move to strive for lower GST cap is in sync with the Congress demand that the 23-27 per cent revenue neutral rate cap was not acceptable and the party wants it to be lower to 18 per cent.
The other big development towards GST getting the Congress support is the government dropping its reluctance to the one per cent additional tax at origin which was brought in at the demands of manufacturing states like Gujarat and Tamil Nadu.
Tax experts have been pointing out that the one per cent additional tax for manufacturing states wad against the spirit behind GST and would add 4 to 5 per cent to cost of goods.
A senior source in the government said, "The one per cent additional tax was introduced as some manufacturing states were reluctant to support the bill. But now the government is not averse to doing away with the tax."
The Congress' third key demand for a clear route of arbitration for dispute resolution however may not get accepted. "The states are not likely to accept a dispute redressed which dilutes their powers. A mechanism that involves a Supreme Court judge would reduce the role of states," the source said.
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