Revenue Neutral Rate (RNR)
- November 13, 2021
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Revenue Neutral Rate (RNR)
Subject – Economy
Context – A tax burden that attacks the federal rights of States
Concept –
- RNR is the rate at which tax revenue remains the same despite giving credit of duty paid on inputs and other factors.
- It is the rate of tax that allows the Government to receive the same amount of money despite changes in the 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).
- RNR is the good indicator of future requirement in calculating the adequate compensation to both state as well as central government.