The group of ministers on the redesign of the slabs of the GST will have six more months to submit its report

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A Group of Ministers (GoM) led by Karnataka Chief Minister Basavaraj Bommai will have another six months to submit its report on the restructuring of the Goods and Services Tax (GST) slabs, a senior government official has said. government to FE. “This (rejig rate) is a complex exercise involving, among other things, the correction of inverted duties in many value chains,” the source said, citing reasons why the group has more time.

The GoM was established in September last year and was then tasked with submitting its report in two months. In December, the group was given more time until the end of March, but it has not yet finalized its recommendations.

The mandate of the GOM is to “review the current rates of the tax slab and recommend changes necessary to raise more resources”.

Another extension would mean the restructuring of the GST slabs to increase the tax neutrality rate (RNR), from just over 11% now to 15.5%, would be delayed. High inflation has reduced the urgency of the exercise, as readjusting rates with the RNR target in mind will inevitably lead to higher rates for a large number of goods and services.

There are now four major GST bands – 5%, 12%, 18% and 28%. A handful of demerit assets in the 28% bracket also attract fees, the proceeds of which go to a separate fund intended to compensate states for “shortfall”.

The GoM will consider merging the tax rate brackets, necessary for a simpler GST tariff structure.
The GST Board is expected to meet in the second half of this month to deliberate on how some states’ revenue concerns will be addressed after a five-year revenue compensation period ends on June 30.

Under the GST offset mechanism, which is guaranteed by the Constitution, state governments are guaranteed annual revenue growth of 14% for the first five years after the tax was launched in July 2017. increase in gross monthly GST collections has given the government some breathing room to recalibrate an action plan on tax rates, as the GST shortfall by states after the compensation mechanism ends will not be so high , officials say.

Gross GST collections exceeded Rs 1.4 trillion for the last three consecutive months, compared to a monthly average of Rs 1.23 trillion in FY22. However, the Center estimates that the monthly average for the whole of the current financial year will be around 1.3 trillion rupees.

While the Council has made some attempts to correct inverted duty structures in several value chains, the decision to reverse a uniform GST rate for textiles has proven that this will not be an easy option either. The council had to scrap a plan to raise GST rates for most textile products in the man-made fiber value chain from 5% to 12% at the end of December 2021, amid protests from Gujarat industry and government. other states. He may not be able to get back to the problem soon.

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