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A Group of Ministers (GoM), led by Karnataka Chief Minister Basavraj S Bommai, will meet on Friday to discuss GST rate rationalisation, inverted duty structure and exemptions. “GoM has been called on the 17th. It will be held virtually,” a senior official told BusinessLine.
Deliberations of this meeting will be presented before the GST Council which may be convened at the end of this month. Although the GoM is unlikely to finalise its report on Friday, it is expected to present an interim report mainly on exemption and inverted duty structure.
Changed ecosystem
A top government source indicated that with inflation concerns and economic uncertainty due to geopolitical situation, the plan to rationalise Goods and Services Tax (GST) rates for boosting revenue collection may be delayed, said a source. “The ecosystem is very charged currently due to surging inflation. The GST Council is also mindful of the existing environment. The Centre has not yet received a report on rate rationalisation from the GoM,” the source added.
Apart from Bommai, the GoM comprises Bihar’s Deputy Chief Minister Tarkishore Prasad, Goa’s representative minister Mauvin Godinho, Kerala’s Finance Minister KN Balagopal, Rajasthan’s representative minister Shanti Kumar Dhariwal, Uttar Pradesh’s Finance Minister Suresh Kumar Khanna and West Bengal’s minister Chandrima Bhattacharya.
In its earlier meeting, the GoM discussed raising rates on some goods and services to ensure that the revenue neutral rate (RNR) reaches the level it was at the introduction of GST. The RNR slipped from 16 per cent to 11 per cent after four years of GST implementation, causing States to lose their revenues. States feel there is an increasing urgency about streamlining rates which were brought down on some goods and services owing to different political and electoral compulsions. But that shouldn’t simultaneously imply that the burden would be passed on to the consumers, they stressed.
Terms of reference
Terms of reference for GoM say, it will “review the current rate structure of GST, including special rates and recommend rationalisation measures, including merger of tax rate slabs, required for a simpler rate structure in GST”. It will also review the current tax slab rates and recommend changes in the same as may be needed to garner required resources.
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, 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. Now, the GoM is expected to suggest on this.
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 minimise instances of refund due to inverted duty structure.”
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