Skip to main content

Next Step in GST Recast: Lower End of Tax Slabs

Next Step in GST Recast: Lower End of Tax Slabs
The next rejig of goods and services tax will likely focus on the lower end of the rate slabs, as the country seeks to further streamline the structure by converging multiple rates into two or three. It will happen after the regime settles down and there is more clarity on revenue following the recast last week.
Simplification of laws, rules and procedures in line with industry’s feedback is also likely to top the GST Council’s agenda in the next few meetings. The rates on some items such as cement and paint, still left at the highest rate of 28%, could be brought down if tax revenue remains robust.
A top official with a state government said the focus would now be to recast the lower 12% and 5% rate slabs.Other issues to be considered by the council are inclusion of real estate and petroleum products under GST.The government has set up a group with industry representation to review the tax regime, which has since its July 1 launch been criticised for having too many rates and being burdensome to comply with.
The latest recast, decided at a GST Council meeting in Guwahati last week, has seen the 18% rate emerging as the dominant slab with nearly half the goods, apart from most of the services, now taxed at that rate. The Guwahati meeting decided to move 178 items to the 18% rate from 28% and cut the GST on eating at restaurants to 5% from Monday, in a decision that would reduce tax revenue by 20,000 crore
Eye on Revenue
It may have been possible to move some more goods to the 18% slab from 28%, but that would have resulted a bigger revenue loss. Officials said cement and paint alone would have cost the government more than Rs 20,000 crore had the two been moved a slab lower.“We need revenue as well,” said the state government official.
But eventually, the 28% slab would be left with very few items, mostly in the luxury and sin-goods category.Other increasingly common-use items that are still in the 28% slab include air conditioners, refrigerators, washing machines, vacuum cleaners and digital cameras. In all, more than 50 items still remain on the 28% list.
A committee headed by chief economic adviser Arvind Subramanian had suggested a revenue-neutral rate of 15-15.5%, with a strong preference for the lower end of that range. It had recommended a standard rate — for services and most goods — of 17-18%, high or non-GST excise rate of 40% for items such as luxury goods and tobacco, and a low rate of 12% for essential goods.
With the latest recast, the rates have moved closer to this structure.A further recast of the 5% rate, moving some up to 12% and scrapping the tax on others will further simplify the GST structure.
Lesser rates will bring stability to the overall tax regime, said experts.“GST needs to be a simple, transparent and stable tax system. Multiple rate slabs result in classification disputes as businesses attempt to classify their products in lower slabs,” said Pratik Jain, indirect taxes leader, PwC.
In most countries, including Australia, Malaysia and Singapore, there is one standard rate, or at best a lower rate in addition to a standard rate.“Single rate will remove complexity from the structure as also alleviate revenue concerns,” said Bipin Sapra, partner, EY.
CONGRESS RAISES PRESSURE
Congress vice-president Rahul Gandhi in a tweet demanded that petroleum products and LPG cylinders be brought under GST.
He said the government should have a single rate that should not be more than 18%, and remove GST on products that the common man uses.
A day ahead of the council meeting in Guwahati, Congress-ruled states had demanded complete revamp of the GST structure.
The Economic Times, New Delhi, 13th November 2017

Comments

Popular posts from this blog

Budget: Startup sector gets new Fund of Funds, FM to allocate Rs 10K cr

  The Indian startup sector received a boost with Finance Minister Nirmala Sitharaman announcing the establishment of a new fund of funds (FoF) in the Budget 2025. The minister unveiled a fresh FoF with an expanded scope, allocating Rs 10,000 crore. The initial fund of funds announced by the government with an investment of Rs 10,000 crore successfully catalysed commitments worth Rs 91,000 crore, the minister said.   “The renewal of the Rs 10,000 crore commitment to the Fund of Funds for alternative investment funds (AIFs) is a significant step forward for the Indian startup and investment ecosystem. The initial Rs 10,000 crore commitment catalysed Rs 91,000 crore in investments, and I fully expect this fresh infusion to attract an additional Rs 1 lakh to Rs 1.5 lakh crore in capital,” said Anirudh Damani, managing partner, Artha Venture Funds.   Damani further added that this initiative will provide much-needed growth capital to early-stage startups, further strengthenin...

After RBI rate cut, check latest home loan interest rates of top banks for loans above Rs 75 lakh

  The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points from 6.50% to 6.25% in its monetary policy review as announced on February 7, 2025. After the RBI repo rate cut, banks such as SBI, Canara Bank, PNB, and Union Bank among others have cut their repo linked lending rates. Most other banks are also expected to cut their lending rates in line with the RBI rate cut. After banks cut their lending rates, their home loan borrowers will have to pay less interest. Normally, when a lender cuts the lending rate, borrowers get two options: Either to go for a reduction in EMIs or reduce the tenure of the loan. The second option will help the borrowers clear their home loan outstanding faster. In case, the borrower goes for reduction in EMI then the lower lending rate of the lender would mean lower Equated Monthly Installment (EMI) for borrowers.   EMI is the amount you will pay on a specific date each month till the loan is repaid in full.A repo rate-linked home ...

GST collections rise 9.9% to exceed Rs 1.96 trillion in March 2025

  Gross GST collection in March grew 9.9 per cent to over Rs 1.96 lakh crore, government data showed on Tuesday. GST revenue from domestic transactions rose 8.8 per cent to Rs 1.49 lakh crore, while revenue from imported goods was higher 13.56 per cent to Rs 46,919 crore. Total refunds during March rose 41 per cent to Rs 19,615 crore. After adjusting refunds, net GST revenue stood at over Rs 1.76 lakh crore in March 2025, a 7.3 per cent growth over the year-ago period.       - Business Standard 02 th March, 2025