Singapore, Sep 12 (PTI) Senior Congress leader Shashi Tharoor on Friday said the rationalisation of GST rates should stimulate Indian economic and business activities, but stressed on the need to move towards a single rate.

He said the Congress party had been demanding the simplification and rationalisation of Goods and Services Tax rates for many years.

"I think the GST cut was a very constructive decision. To be honest, We have been calling for it for some years now. My party has been advocating a simplification of GST from the very beginning," Tharoor said on the sidelines of CREDAI-NATCON conference here.

"Having four rates was not just confusing. It was also unfair," he added.

Now, Tharoor said, the situation is simpler with two rates.

"So I would say, by and large, we have got something good. It should stimulate the economy. We hope it will stimulate manufacturing," he said.

"Eventually, I think we would all like to see one rate rather than even two. And that is something that is some time away in the future, but definitely I think we should be heading in the direction of simplification," the Lok Sabha member added.

The Congress leader also made a case for more market reforms.

"One thing that is overdue in our society, generally, in our economy, is the cutting down of the number of regulations we have. We are the most regulated economy in the world. And we can learn from places like Singapore, where we are today, where things are so much more simple and efficient," Tharoor said.

The GST Council has approved a two-tier GST structure with rates of 5 per cent and 18 per cent for most goods and services and a special rate of 40 per cent for tobacco and related products as well as ultra-luxury items.

The new rates will be effective September 22, barring tobacco and associated products, which will continue to be taxed at 28 per cent plus a compensation cess till December 31.

As part of the rationalisation, GST has been exempted on individual life insurance, including term, ULIP, and endowment plans and reinsurance services. Currently, premium payment on such policies attracts 18 per cent tax. PTI MJH HVA

GST rationalisation moves to two-tier rates, aims to stimulate economic activity with insurance exemptions. The document reports endorsement of a new two-tier GST structure that applies lower and standard rates to most goods and services and a higher special rate to tobacco and ultra-luxury items, with transitional treatment preserving prior taxation and compensation cess on tobacco for a limited period. It records that GST has been exempted on individual life insurance (term, ULIP, endowment) and on reinsurance services, whereas such premiums previously attracted the standard rate.