Revenue neutral rate
Also called: RNR · Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Beyond NCERT
Meaning
The revenue neutral rate (RNR) is the tax rate at which a new tax raises the same revenue as the old taxes it replaces. It was central to GST design. A rate below the RNR means the government loses money. A rate above it means taxpayers pay more than before.
Example
The Arvind Subramanian committee (2015) put GST's RNR at 15-15.5%. It suggested a standard rate of 17-18%.
Don't confuse with
- Standard rate: the rate that applies to most goods and services (18% today). The RNR is the average rate needed for equal revenue, not the rate on any particular good.
Related concepts
- Goods and Services Tax
- Destination-based taxation
- CGST, SGST and IGST
- Input tax credit
- Reverse charge mechanism
- Composition scheme
- Zero-rated supply
- E-way bill
- E-invoicing