Revenue Neutral Rate - Tax rate to get same amount of money despite changing tax laws

Q.  What is Revenue Neutral Rate?
- Published on 04 Aug 16

a. Tax rate to get more amount of money on changing tax laws
b. Tax rate to get same amount of money despite changing tax laws
c. Tax rate to get more amount of money without changing tax laws
d. To get more money by keeping the tax rates same

ANSWER: Tax rate to get same amount of money despite changing tax laws
 
  • It is the tax rate that allows the government to receive the same amount of money despite of changes in tax laws.
  • In the GST regime the revenue of the government would not be same in comparison with the present tax structure due to tax credit mechanism, removal of cascading effect, or otherwise.
  • Therefore an adjusted in tax rate is required to avoid reduction in revenue of the government.
  • This adjusted Rate is termed as Revenue Neutral Rate (RNR). It is the rate at which tax revenue will remain same, despite allowing input tax credit and other factor.

Related Content

➨ Post your comment / Share knowledge


Enter the code shown above:

(Note: If you cannot read the numbers in the above image, reload the page to generate a new one.)
▲