Consumption booster from GST slabs rejig planned
The Goods and Services Tax Council (GST) may meet in August to discuss the much-anticipated restructuring of tax rates and slabs, amid heightened expectation of the exercise leading to a consumption booster, with a reduction in aggregate tax incidence.
“Since there is not much time left before the monsoon session of Parliament, the next Council meeting may take place after the session,” an official said. This would also give some additional time to officials to work on the rate rationalisation, slabs rejig and any alternative arrangements to be made after the compensation cess, ceases to exist from March, the person added. However, another official said the Council meeting could take place during the Parliament session also.
The need for restructuring of GST has become more urgent in the wake of a plateauing of the GST receipts– for the last three years, the gross collections hovered around 6.7%, though it was much higher than the levels in the initial years of the tax launched eight years ago. Experts feel that generating further buoyancy will depend on how the tax’s structure is revamped, and simplified. Benign tax rates could lead to improved compliance, and a widening of the tax base, they contend. In June, the GST receipts grew 6.2% on year, the slowest rate in four years.
According to sources, an understanding has been reached among official circles rather than try to hike the rates and pursue a (higher) |revenue neutral rate,” the slabs recast should result in simplification and lower rates in general. In a recent interview with FE, finance minister Nirmala Sitharaman also gave credence to this idea, by stating that “the expectation is that it (weighted average GST rate) will come down.”
“We re working to have it (lower rate). You can have the revenue buoyancy if the rates are low enough, and that leads to expansion (of base),” she said. Stating that the time has come for reaching a consensus in the (Centre-State) GST Council to design “a very simplified and easy-to-comply-with tax,” she iterated: “We will be doing it.”
However, the upcoming review is unlikely to result in inclusion of any of the major items that are currently outside the GST framework in its ambit, notably auto fuels and ready-to move-in real estate and electricity. When asked about expansion of GST base, Sitharaman asserted that GST/VAT a “well-laid-out system.” “Those (items) which were in the VAT regime were brought in here (under GST). So, we can simplify it and reduce it (tax) so that it becomes attractive,” she said.
FE had earlier reported that even after the compensation cess, which was meant for giving revenue guarantee to states, ceases to exist from March next year, a clutch of luxury and demerit goods might be subjected to other existing cesses.
