analysis - gst will come on time, but multiple rates will dilute benefits - rate air purifiers

Douglas busvin and Manoj KumarNEW Delhi (Reuters)-
India is one step closer to developing a national sales tax, but the interest rate agreement reached on Thursday will hit some businesses more than others, although its complexity will dilute any boost to growth, and undermine its reliability as a source of income.
Tax on goods and services (GST)
The reforms planned to begin in April 1, 2017 have been promoted as a reform that can help Prime Minister Modi achieve his employment and growth agenda.
In Modi's key victory, Parliament revised the constitution in August, clearing the way for GST, which will unify Asia's third
For the first time, it became the largest economy in the common market.
But negotiations between India's Finance Minister Arun Jaitley and his counterparts in 27 state governments on Thursday exposed the difficulties of dealing with so many stakeholders.
The GST Council, established to oversee taxation, agreed on a more substantial progressive structure of goods than previously anticipated tax rates of 5, 12, 18 and 28%, depending on the type of product involved.
Jaitley says the highest price will apply to goods purchased in middle-income countriesclass Indians.
On top of that, necessities such as grains, which account for half of the consumer price index, will not be taxed at all.
Finally, a "success"
Separate central tax
Will be add to luxury car and tobacco and carbonated drinks and other harmful products of the highest 28% GST tax rate in.
The total burden of this "sin" tax still needs to be calculated, and the same applies to services that are now taxed at a 15% rate.
"India, like the European Union, has a central government," said Harishanker Subramanian, head of indirect taxes at Ernst & Young.
"This is fiscal federalism. It's not easy.
"Despite the loose ending, the parliament that opened the winter session on November now looks more and more likely.
16, will be able to pass key GST laws like the State Council to maintain the normal operation of the start-up schedule.
GST should be a positive development for Jay Kannaiyan, who runs a startup that produces and sells low-priced goods
Due to the air pollution crisis in the capital New Delhi and other Indian cities, air purifiers are a product in high demand.
Kannaiyan supports GST as it will free his company, Smart Air filter Pvt Ltd, from red tape created by valueadded tax (VAT)
This is the tax currently collected by the states, and one of several taxes that will be canceled under the tax reform.
The VAT rules vary greatly and can be taxed at different times according to the country during the transfer of goods.
Kannaiyan, 35, said in a small work area in a dusty business district on the southern edge of Delhi: "It's troublesome because it slows down our operations . ".
His biggest concern is that consumer durables could be taxed at a maximum of 28% on goods and services rather than the 18% previously expected, hurting his profits.
Which products are assigned to which rate needs to be worked out.
Uncertainty "hurts us, hurts our plans," Kannaiyan said, and he plans to more than double sales next year.
Remarking, not REFORMEDIt, is far from the properties of so-
Called "good tax"
Low, flat, wide.
Advocates of simpler goods and services taxes have launched an offensive condemning the current proposal as a mere renegotiation;
Not real reform.
Officials and experts involved in the policy process said Jaitley had taken the path of least resistance and extensively adjusted the tax rate to the existing burden to avoid any unwelcome inflation when the GST came into effect.
"The authorities have revealed the approach described in a disappointing start, and can also be otherwise" Kelkar, a former Treasury secretary who wrote a milestone 2009 consumption tax.
Jaitley believes that in order to prevent the tax on the poor from falling too much, a variety of GST rates are needed.
"Air conditioning and hawai chappals cannot be taxed at the same rate," he wrote in a recent blog post, using Hindi names in flip-flops.
Tax experts and economists say that if the goods and services tax is passed in this form, the promotion of economic growth and national income will not be as good as simple taxes.
"An ideal GST will only charge a single tax rate with few exemptions --
Instead, we are getting multiple tax rate structures and multiple exemptions, "said Pranjul Bhandari, chief Indian economist at HSBC, who halved her forecast for GST growth to 0.
4 of a percentage point.
What the accountant did find wrong was the proposed cess, which would raise funds for Jaitley to offset the initial loss of revenue from the GST to the States.
"The concept of success is a twist," said Menon in Menon, head of indirect tax at KPMG India . ".
"The purpose of the GST is to eliminate multiple taxes and to develop uniform laws and uniform taxes nationwide. "(
The work of Douglas busvin;
Edited by Martin Howell)