GST: Single rate likely for services, no hike in tax burden

Surabhi New Delhi | Updated on January 11, 2018 Published on May 17, 2017

Finance Minister Arun Jaitley will chair the GST Council meeting, which islikely to be the last one before GST’s July 1 rollout - Photo: Ramesh Sharma

File photo of Union Finance Minister Arun Jaitley with Minister of State for Finance Santosh Gangwar and Revenue Secretary Hasmukh Adhia.   -  PTI

Two-day GST Council meeting begins today for fitment of commodities and new rules

In what is being seen as the last round of discussions before the introduction of the Goods and Services Tax regime from July 1, the Centre and States will meet over two days on Thursday to finalise the fitment of commodities in rate slabs, the list of exemptions as well as the rules for the new levy.

In its meeting, the GST Council is expected to firm up the exact levy over each commodity under the new tax regime. Sources said the general principle to be followed would be to ensure that the tax incidence on most goods should remain the same.

The only exceptions could be high-end consumer goods and fast-moving consumer goods such as gourmet foods and cosmetics.

The Council in its meeting in November had agreed to a four-rate structure under GST of 5, 12, 18 and 28 per cent.

While some States have expressed concern, services are likely to be taxed at a single rate of 18 per cent, except for transport which will get the benefit of abatement at present. Some other services of mass consumption and public goods such as education, healthcare and even pilgrimage related services will continue to enjoy exemptions.

States have been worried that the tax incidence on services under GST could increase from the present 14.5 per cent. Sources said a few States could also ask for a discussion on this issue.

Gold, silver rate

Meanwhile, the GST Council, led by Finance Minister Arun Jaitley is also expected to finalise the tax rate on gold and silver, which is likely to be kept at four per cent.

“The tax incidence on gold is one of the last remaining issues under GST to be finalised. A 4 per cent rate would be higher than the current rate but not too high so as to encourage smuggling,” noted an official, pointing out that it also is in line with what was recommended in Chief Economic Adviser Arvind Subramanian’s report to the Finance Ministry. A committee of officers of the Centre and States has been working on the fitment of commodities as well as the exemption list.

Pruning exemptions

With the general principle of broadening the tax base under GST, the Centre is also in favour of pruning the list of exemptions to only mass consumed items, necessities and food articles.

“A slightly tough stance now will come in useful at a later time because in one stroke we can reduce exemptions and enhance tax revenue,” said the official.

At present, the Centre has an exemption list of nearly 300 items while States have about 100 items excluded from value added tax. The Finance Ministry as well as State governments have been getting numerous representations to continue exemptions or keep more items out of the tax net.

Meanwhile, with the July 1 deadline looming, the Council will also review the preparedness of officials as well as the GST Network.

The issue of IT training of officials and enrolment under GST of businesses have been continuously under monitoring but has still lagged behind.

The Council will also approve the draft rules for GST relating to subjects including e-way Bills and refunds.

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Published on May 17, 2017
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