In a welcome and sweeping effort to rationalise tax rates, the GST Council has slashed the number of items in the 28 per cent bracket from 228 to 50, moved six items apiece from 18 per cent to 5 per cent and 5 per cent to nil, respectively, and another eight items from 12 per cent to 5 per cent. Scrapping the absurd distinction between types of restaurants, a flat 5 per cent rate will apply across categories, save five-star hotels. Consumer items such as beauty products, chocolates, detergents are among the 178 items that have been moved to the 18 per cent bracket. Strangely enough, this includes marble and granite, even as paints and cement stays in the 28 per cent category. Likewise, washing machines and airconditioners remain in the 28 per cent bracket. Such tinkering is expected to continue as a response to critical feedback, and irate responses, from small businesses and consumer groups. There can be no denying the perception that a clutch of Assembly polls around the corner has prompted the political class to act with alacrity. While the Council’s keenness to address anomalies is laudable, many issues remain to be sorted out — rules, fitment, and compliance headaches.
At present, GST is anything but the simple tax that it was expected to be. For instance, three rates are applicable under the composition scheme itself. It is not clear how the withdrawal of reverse charge, a relief to MSMEs, will apply to units under this category. The GST network is a huge inconvenience. Given the time taken to upload returns, monthly filing could be dispensed with, at least till the software is made user-friendly. The GST Council should address glitches on a war-footing, so that the potential of this reform measure which has taken two decades to put into place is not frittered away. Those carping about GST should not forget the big picture on what it has done — bringing all goods and services under central and State taxes and doing away with the earlier maze of levies. The present climate of mistrust must be nipped in the bud by addressing grievances and conducting advocacy exercises.
Above all, there are some perspective issues. The concept of luxury goods needs a relook in view of changing market and socio-economic realities. Goods and services in the 28 per cent category can invite grey market activity, as critics have rightly observed. GST is meant to streamline taxes for the convenience of businesses and consumers. Rather than rely on high rates to meet revenue targets, the emphasis should be on broadening the tax base. While estimating that ₹20,000 crore will be lost due to lower rates on range of items, this maxim should not be forgotten.
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