GST has reduced the rate at which people have to pay tax: Finance Ministry

New Delhi, Aug 24: The Finance Ministry on Monday said GST has reduced the rate at which people have to pay tax, helped increase compliance and doubled taxpayer base to 12.4 million.

In a series of tweets, on the first death anniversary of former Finance Minister Arun Jaitley, the ministry said before goods and services tax (GST), the combination of value-added tax (VAT), excise, sales tax and their cascading effect resulted in high standard rate of tax up to 31 per cent.

It is now widely acknowledged that GST is both consumer and taxpayer-friendly. While the high tax rates of the pre-GST era acted as a disincentive to paying tax, the lower rates under GST helped to increase tax compliance, the ministry said.

The number of assessees covered by the GST at the time of its inception was about 6.5 million. Now the assessee base exceeds 12.4 million.

The Ministry tweeted, "Once GST was implemented, the tax rate on a large number of items was brought down. As of now, the 28 per cent rate is almost solely restricted to sin and luxury items. Out of a total of about 230 items in this slab, about 200 have been shifted to lower slabs."

GST, which subsumed about 17 local levies, was rolled out on July 1, 2017. Jaitley held the finance portfolio in the first term of the Modi government since 2014. Businesses with an annual turnover of up to Rs 40 lakh are GST exempt. Initially, this limit was Rs 20 lakh.

Additionally, those with a turnover up to Rs 1.5 crore can opt for the Composition Scheme and pay only 1 per cent tax. "GST has reduced the rate at which people have to pay tax. The revenue-neutral rate as per the RNR Committee was 15.3 per cent. Compared to this, the weighted GST rate at present, according to the RBI, is only 11.6 per cent. It is now widely acknowledged that GST is both consumer and taxpayer-friendly.

While the high tax rates of the pre-GST era acted as a disincentive to paying tax, the lower rates under GST helped to increase tax compliance," the Ministry added.

The Ministry added that significant relief has been extended to the construction sector, particularly the housing sector, which has now been placed at the 5 per cent rate. Meanwhile, GST on affordable housing has been reduced to 1 per cent.