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Delayed process of government formation in Uttar Pradesh and Goa has pushed further the dates of deliberation on Goods & Services (GST) rate rationalisation.
Both the States have representatives in the Group of Ministers (GoM) led by Chief Minister of Karnataka, Basavaraj S Bommai. Both the States went to polls for which results were declared on March 10. While the BJP has swept back to power in both the States, the government is yet to be formed. The UP CM is expected to be sworn in this Friday but no date has been announced for Goa.
“Once the government is formed in both the States, then GoM can meet and take the deliberations forward,” a senior Finance Ministry official told BusinessLine. The committee has Suresh Khanna, Finance Minister in Yogi’s second-term cabinet from UP and Mauvin Godinho, Transport and Panchayati Raj Minister in Sawant Cabinet from Goa as members. As of now, it is yet to be decided whether Khanna in UP and Godinho in Goa will continue in the second term of their respective governments in both the States.
The GoM was set up after GST Council meeting in September last year. Terms of reference for the GoM say that it will “review the current rate structure of GST, including special rates and recommend rationalization measures, including merger of tax rate slabs, required for a simpler rate structure in GST.” It also reviews the current tax slab rates and recommend changes in the same as may be needed to garner required resources.
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As on date, there are four main rates under GST: 5, 12, 18 and 28 per cent. Then there are special rates of 0, 0.25, 1 and 3 per cent. Besides, there is also provision of cess at the rate between 1 and 25 per cent. For services there are four rates — 5, 12, 18 and 28 per cent, besides special rate of 0 per cent. There have been demands for restructuring the slabs by merging either 12 and 18 or 5 and 12.
Rate review sought
The GoM has also been asked to review the supply of goods & services exempt under GST with an objective to expand the tax base and eliminate breaking of ITC (Input Tax Credit) chain.
Another area to review will be instances of inverted duty structures (higher rate on inputs, lower rate on out put resulting in refund). The GoM will recommend “suitable rates to eliminate inverted duty structure as far as possible so as to minimize instances of refund due to inverted duty structure.”
Last year, the Council corrected the anomaly on mobile hand set while on September 17, it decided to do the same for footwear and textile. Accordingly, it was decided all footwear and textile, except cotton fiber, will attract GST at the rate of 12 per cent from January 1.
However, due to string protest, removal of inverted duty structure on textile has been put on hold. Now, GoM has been asked to suggest special rate of textile.
Apart from Bommai, and Ministers of UP and Goa, Bihar’s Deputy Chief Minister Tarkishor Prasad, Kerala’s Finance Minister KN Balagopal, Rajasthan’s representative Minister Shanti Kumar Dhariwal, are members of GoM on rate rationalisation. The GoM has already has had couple of meetings and expected to finalise the report in next meeting.
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