Higher GST rate may lead to compliance issues: E&Y

In a country the size of India, there cannot be a goods and services tax (GST) rate higher than 18-20 percent, says Harishanker Subramaniam, Partner, Ernst & Young. India being such a vast nation, compliance is certainly going to be an issue. The government should keep it at 18 percent as it impacts everyone, he says. Also as the organised sector is going be a part of it, the tax base is going to increase, so he feels there is no point in keeping a tax rate higher than 18 percent.But states may not be happy with a low rate, says Govinda Rao, Chairman, NIPFP GST Comm. He feels 22 percent should be the revenue neutral rate. This he says is because for the first few years, states will be compensated, but later they will struggle. Arun Anandagiri, Editor, Taxsutra.com, says while Congress party is pro-poor and wants the rates to be lower, the state government wants the GST rate higher just so they can serve the poor better with welfare schemes.Globally, the GST rate is 15 percent says Deepak Premnarayen, President, Indian Merchants' Chamber. Anything higher than 18 percent is irrational and won't be beneficial, mainly due to non-compliance, he says.Watch video for more.