After four years of implementation, the Centre and States have initiated an exercise to rework the rates slab under the Goods and Services Tax (GST), with the formation of a Group of Ministers (GoM). The GoM will be led by the Chief Minister of Karnataka, Basavaraj S Bommai.
One more GoM has been set up under the convenorship of Deputy Chief Minister of Maharashtra, Ajit Pawar, to suggest ways for GST System Reforms.
Terms of reference for the first GoM say that 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 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 beside 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 GoM will review this.
Expanding tax base
The GoM has also been asked to review the supply of goods and 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 output 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.”
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, all footwear and textile, except cotton fibre, will attract GST at the rate of 12 per cent from January 1.
Apart from Bommai, Bihar’s Deputy Chief Minister Tarkishor 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 K Khanna and West Bengal’s Finance Minister Amit Mitra will be members of the GoM on rate rationalisation. The GoM will submit reports in two months.
Better use of IT system
This group has been set up to review IT tools and interface available with tax officers and suggest measures to make the system more effective and efficient, including changes in business processes, identify potential sources of evasion and suggest changes in business processes and IT systems to plug revenue leakages.
An Office Memorandum (OM), issued for constitution of GoM, said the GST Council acknowledged that better use of IT system is the best way to minimise evasion and at the same time ease compliance in GST. Accordingly, GoM will suggest way to identify possible use of data analysis toward better compliance and revenue augmentation and suggest use of such data analysis.
This GoM has Delhi’s Deputy Chief Minister Manish Sisodia, Haryana’s Chief Minister Dushyant Chautala, Andhra Pradesh’s representative Minister B Rajendranath, Assam’s Finance Minister Ajanta Neog, Chattisgarh’s Finance Minister T S Singh Deo, Odisha’s Finance Minister Niranjan Pujari, Tamil Nadu’s Finance Minister P Thiaga Rajan.