‘GST Council to look at pruningexemptionlist’

Revenue secretary Tarun Bajaj said the council will also look at the anomalies in the tax system

NEW DELHI: The next meeting of goods and services tax (GST) Council will consider pruning the list of tax-exempt items and fixing the anomaly of raw materials getting taxed more than certain finished products, revenue secretary Tarun Bajaj said. The council will approach these issues while sticking to the overall principle of tax stability.

However, the current tax rates on four wheelers (28%) which also attract a GST cess meant for financing states, will have to continue for a few more years, Bajaj said on Wednesday at a virtual annual meeting of the Confederation of Indian Industry (CII) that deliberated on Aatmanirbhar Bharat or self-reliant India.

The GST Council is expected to meet in the next few weeks but a date is yet to be finalized. Bajaj said the government’s policy is to give “a stable and a predictable tax regime.”

Acknowledging the industry grievance that tax on automotive sector is high, Bajaj said, “There are a lot of things I also get the temptation to tinker. But I would say we need stability and some kind of predictability there, so that the whole indirect tax regime stabilizes.”

“On tax rates, I quite agree with you on the automotive sector. You are talking about twowheelers, but I would say the four-wheelers are charged not only 28% GST, but we also charge a cess which is much more, and as I see it, it will continue for a few more years,” said Bajaj.

He explained that the revenue-neutral rate of GST was

One thing that I see missing from the corporates is the animal spirits. I don’t see private investment happening

15.6%—the weighted average rate needed for the transition to the new indirect tax regime in 2017 to be a revenue-neutral affair to the exchequer—but the current rate is 11.4% or 11.5%, Bajaj said, quoting a Reserve Bank of India study.

The rates have come down at the macro level, but in a few sectors, it has gone up and one has to look at the solutions to bring down the rates which are very high, and take out certain items which are under exempted items and rectify the inverted duty structure, Bajaj explained.

Bajaj’s comments indicate that in order to lower the tax rate on certain items, the list of exemptions have to be limited and the anomaly of having to make tax refunds in the case of items like footwear and fertilizers where the final products are taxed at a rate lower than that on raw materials. This has been discussed in the GST Council meetings for a long time, but has not been implemented.

“So we need to do that, and I am sure in the coming GST

Council meeting when we lift the agenda, I am sure we will be able to get those things,” explained Bajaj.

Bajaj told businesses that the central government has already lowered the corporate tax rate for businesses not availing of tax breaks and for new factories being set up by 2023, but the animal spirits of the industry were still missing.

“I want to understand from you, one thing that I still see missing from the corporate sector is the animal spirits. I don’t see private investment happening as much. I want to understand what more do you expect from us to do so that that also starts,” he said. Bajaj added that the government’s infrastructure spending and other steps can help to an extent but for long term, sustained growth of the economy and private investments were needed in manufacturing and services.

The secretary also told businesses that he has told tax officers not to chase every penny of tax to be collected.