GST Council working on possible changes, changes expected regardless of new govt
Regardless of who comes to power, the controversial Goods & Services Tax is set for an overhaul after the swearing-in of the new government.
Top finance ministry officials said they have been working on the premise that more goods currently in the 28 percent luxury bracket would be brought down to a lower rate and that the GST median rate now at 18 percent could eventually be reduced.
“This is a given. There will be a continuation of GST reforms regardless of who forms the government. The aim is two-fold, slowly reduce rates, bring more goods and services under the GST umbrella and make the whole process simpler,” said officials.
While the Congress Manifesto has promised to tweak the current 4-rate tax structure into a two rate one, the BJP manifesto has remained delightfully vague but promised continued simplification of the GST tax.
GST currently has broadly four rate slabs – 28 percent, 18 percent, 12 percent and 5 percent besides zero rated category for essential goods.
Officials said they have been working towards a three slab regime, with a far leaner list of goods taxed at the top-end of 28 percent.
“Some feel the two slabs of 18per cent and 12per cent could be merged into one rate and that finally, there could be three rates – one standard rate for most of the goods, one higher rate for demerit and luxury goods and one lower rate for the goods of consumption by the poor,” said Sumit Dutt Majumder, former Chairman, Central Board of Excise and Customs and author of `GST in India’.
GST is a taxation reform measure which replaced numerous central and state taxes and levies such as excise, VAT, luxury tax, octroi with one single tax from July 1, 2017. Though the tax measure was planned by the previous Congress-led UPA government and at that time opposed by the BJP, it was eventually rolled out last year under the BJP-led NDA government.
However, the introduction saw multiple rates, heavy-handed bureaucratic rules and a poorly designed internet architecture to support the tax measure, causing chaos and uncertainty among small businesses. Consequently, since its launch 18 months ago, the GST has undergone several rounds of drastic changes after protests by traders and small manufacturers who have been hit by the complex tax rate.
“While at the beginning of GST there were too many items, more than 270, in the highest slab of 28per cent, later in 34 meetings of GST Council, that list has been puned to just 28 items. Similar pruning has been done for the other slabs of 12 and 18per cent. So, it can be said that already in the course of one year, GST has resulted in overall lowering of the indirect tax rates,” Majumder said.
The Congress manifesto’s more drastic recommendation is to not only have one median rate and luxury rate but to do away with the lower discounted GST rate f 5 per cent. “The Congress manifesto seems to indicate that goods taxed at the lower rate could be zero-rated in relief to consumers,” pointed out Majumder.
Finance Ministry officials, however, said that altogether moving all goods in the 5 per cent rate to zero, could be problematic, especially as it might result in loss of revenues for states.