Economy

GoM on GST rate rationalisation may seek more time to finalise recommendations

BL New Delhi Bureau | Updated on: Jun 17, 2022
The GoM is likely to submit an interim report before the GST Council meeting, scheduled later this month

The GoM is likely to submit an interim report before the GST Council meeting, scheduled later this month | Photo Credit: indiaphotos

States do not believe the moment to be opportune for a rate rejig amid high inflation

A Group of Ministers (GoM), led by Karnataka Chief Minister Basavraj S Bommai, is likely to take more time to suggest its recommendations on GST rate rationalisation. However, it is likely to submit an interim report before the GST Council meeting, scheduled later this month.

The group met virtually on Friday where various members expressed their views on merger of rates and rationalising rate on certain products, said sources. However, no consensus was arrived upon. The States reportedly do not believe that it is the most opportune moment for a rate rejig which will result in higher rates on a number of goods and services amid soaring inflation.

This view is in line with the Centre’s belief as well. A top Central government official had earlier indicated that with inflation concerns and economic uncertainty due to the geopolitical situation, the plan to rationalise GST rates for boosting revenue collection may be delayed.

As on date, there are four main rates under GST for 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, apart from a special rate of 0 per cent. There have been demands for restructuring the slabs by merging either 12 and 18 or 5 and 12.

According to sources, the GoM’s interim report that will likely be presented before the GST Council, may give some suggestions regarding doing away with exemption on certain services. It will also seek more time to finalise its views on rate rationalisation.

Commenting on the latest development, Saket Patawari, Executive Director with Nexdigm, said the fact that GoM could not reach a final decision on the rationalisation of GST rates and slabs shows they are treading carefully on this aspect, and would conclude only on proper assessment of the impact such changes would have on the GST revenue. The GoM has also decided to maintain a status quo in relation to the inverted duty structure on textiles. “We would now have to wait till the month end to see if the GST Council announces any rate changes to lay a foundation for the overhaul in future,” he said.

Published on June 17, 2022
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