Panel for 2-tier slab to boost GST revenue
NEWDELHI: A committee of officers set up to suggest ways to boost Goods and Services Tax (GST) revenue has proposed a two-slab structure of 10% and 20%, besides a higher rate on luxury and sin goods; imposition of cess on items such as cosmetics, gambling and recreational services; and withdrawal of exemptions on public school education, high-end healthcare facilities and air-conditioned public transport. The changes were suggested in a presentation made to the GST Council last week, two people with direct knowledge of the matter said on condition of anonymity.
The proposed rates of 10% and 20% will subsume the existing three rates of 5%, 12% and 18%. The presentation is silent on the rate at which luxury and sin goods are to be taxed, the people added, indicating that this could be different from the current 28%.
The panel also suggested raising existing cess rates and having inflation-indexed specific levies, the two people said. In addition to ad valorem rates, cesses on various luxury items and sin goods attract levies at specific rates. For example, filter cigarettes attract a 5% cess and specific levies ranging from ~2,126 per thousand to ~4,170 per thousand depending on their length. Coal also attracts cess at ~400 per tonne. “It is up to the GST Council to bring the suggestions on the table to discuss further. The presentation was part of the agenda of the 38th meeting [of the GST Council] and it has not yet taken any decision on this matter,” one of the two people cited above said. The council, which is the apex decision-making body on the indirect tax, is chaired by the Union finance minister and the finance ministers of states and union territories are its members.
The committee of officials suggested measures to make the GST regime efficient and remove anomalies such as an inverted duty structure, which causes an annual revenue loss of ~20,000 crore.
According to the panel, manufactured goods in the tax bracket of 5% and 12%, such as fertilisers, cellphones, footwear, renewable energy gear, and man-made yarns suffer from an inverted duty structure, where tax on finished goods is lower compared to the tax on inputs.
Some GST Council members and GST officials who did not wish to be identified, said revenue collection has not been buoyant mainly due to subdued consumption in a sluggish economy. Due to insufficient cess fund, the Union could not compensate states for their revenue shortfall in October and November.