Skip to main content

Revenue concerns may push back further GST cuts

Revenue concerns may push back further GST cuts
With revenue concerns surfacing,areduction in goods and services tax (GST) rates for consumer durables in the 28 per cent slab may take longer than expected.With almost three months to go for the fiscal year to end, pruning the 28 per cent slab again may not happen in the next GST Council meeting in January.
The reduction in rates for more than 200 items in the November meeting had raised expectations that white goods would be taken out of the 28 per cent slab.According to officials, the January meeting will not discuss rate reduction and the focus will be on stabilising revenue collection
“The meeting in January is unlikely to look at reducing rates.A decision will be taken after the Union Budget is presented in February.The revenue position will become clear after that,”asenior official in the Council told Business Standard
The focus was to meet the revenue collection target, he added.The Centre and the states should collect Rs 91,000 crore a month, according to the target set on the basis of the Budget Estimates of the Union government and specific formula for the states.
The formula is taken from the compensation being given to the states, assuming their revenue collection will grow 14 per cent over the base year of 2015-16.Fiscal uncertainties were voiced after the collections touched their lowest in October at Rs 83,346 crore and a further slowdown is expected after the impact of the massive rate reduction in the November meeting is accounted for.
“With almost three months to go for the fiscal year, the focus is on improving revenue collections,” another official said.The GST rate for 176 items, including detergents, shampoos, and beauty products, was reduced from 28 per cent to 18 per cent, while on two others to 12 per cent at the November 15 meeting, leaving only 50 items in the highest bracket.
Union Finance Secretary Hasmukh Adhia has asked states and union officers to review revenue collections in the first five months compared to the corresponding period last year.The slowdown in revenue collection prompted the Council in its meeting on Saturday to doanation wide rollout of the electronic way bill from June 1 next year to plug revenue leakages and tighten enforcement.
The rollout of the bill for interstate movements of goods would be advanced to February 1 from April 1 decided earlier.Revenue collections have been erratic and are yet to settle down in view of changes in rates and transitional provisions.
The government may take some more time to analyse the impact of the changes before it embarks on further stream lining the GST rate structure,” said Bipin Sapra of EY.Saloni Roy of Deloitte said after the statement that the GST rates of 12 and 18 per cent could be combined to make a single rate, there had been hopes that “we may see another rate revision, possibly downwards like the one witnessed in the mid November”.
“However, considering that GST collections are yet to stabilise this rate rationalisation may happen only after we see GST revenue collections achieving some stability,” said Roy.The GSTN has introduced the facility for tax officers of all states and union territories to examine and monitor the details of all returns and ledgers.

The Business Standard, New Delhi, 26th December 2017

Comments

Popular posts from this blog

RBI minutes show MPC members flagged upside risks to inflation

RBI minutes show MPC members flagged upside risks to inflation Concerns about economic growth and easing inflation prompted five of the six monetary policy committee (MPC) members to call for a cut in the repo rate, but most warned that prices could start accelerating, show the minutes of the panel’s last meeting, released on Wednesday. The comments reflected a tone of caution and flagged upside risks to inflation from farm loan waivers, rise in food prices, especially vegetables, price revisions withheld ahead of the goods and services tax, implementation of house rent allowance under the 7th pay commission and fading of favourable base effect, among others. On 2 August, the panel chose to cut the repurchase rate—the rate at which the central bank infuses liquidity in the banking system—by 25 basis points to 6%. One basis point is one-hundredth of a percentage point. Pami Dua, professor at the Delhi School of Economics, wrote that her analysis showed “a fading economic growth outlook, as …

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

Differential Tax Levy under GST: Food Firms May De-Register Trademarks

Differential Tax Levy under GST:Food Firms May De-Register Trademarks The government’s decision to charge an enhanced tax rate on trademark food brands is leading several rice, wheat and cereal manufacturers to consider de-registering their product trademarks. Irked by the June 28 central government notification fixing a 5 per cent goods and services tax (GST) rate on food items packaged in unit containers and bearing registered brand names, the industry has made several representations to the government to reconsider the differential tax levy, which these players say is creating an unlevel playing field within these highly-competitive and low-margin industries. Sources say that the move has affected the packaged rice industry the hardest and allowed the un-registered market leaders, India Gate and Daawat, to gain advantage as compared to other registered brands such as Kohinoor and Lal Qilla. Smaller players are even more worried with this enhanced rate of tax (against the otherwise …