Work needs to be done to reduce GST exemption in services, says Revenue Secy
NEW DELHI: India’s services sector activities touched the highest mark since April 2011 amid ongoing improvements in demand conditions, even as cost pressures in the service economy remained stubbornly high, a monthly survey said on Tuesday.
The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from 58.9 in May to 59.2 in June — its highest mark since April 2011.
For the eleventh straight month, the services sector witnessed an expansion in output. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion while a score below 50 denotes contraction.
“Demand for services improved to the greatest extent since February 2011, supporting a robust economic expansion for the sector over the first quarter of the fiscal year 2022/23 and setting the scene for another substantial upturn in output next month,” said Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence.
According to panellists, the upturn stemmed from ongoing improvements in demand following the retreat of pandemic restrictions, capacity expan
NEW DELHI: A lot of work still needs to be done to prune GST-exempted items, especially in the services sector, Revenue Secretary Tarun Bajaj said on Tuesday.
Addressing a CII interactive session, Bajaj said the effort is to remove the rough edges in Goods and Services Tax (GST) over the next two-three years.
On rationalisation of GST rates, the secretary said a group of ministers is looking into it. We will have to wait for some time, he said. Exemptions still remain, a large number on the services side, Bajaj said, adding work needs to be done to prune it .
On representations that 5 per cent GST on non-ICU hospital rooms above Rs 5,000 is against affordable healthcare, Bajaj said the percentage of rooms in hospitals which charge more than Rs 5,000 is minuscule . sion and a favourable economic environment.
Firms were able to secure new orders despite charging more for their services.
If I can spend Rs 5,000 on a room, I can pay Rs 250 for GST. I don’t see any reason for such a messaging that 5 per cent GST is hitting affordable healthcare, Bajaj said.
The secretary said the 28 per cent slab in GST contributes 16 per cent to the gross GST revenue, while the major chunk of 65 per cent comes from the 18 per cent slab. The slabs of 5 per cent and 12 per cent contribute 10 per cent and
June data showed the fastest rise in selling prices since July 2017, as several companies sought to transfer part of their additional cost burdens to clients.
“Cost pressures in the service economy remained stubbornly high in June, despite easing to a three-month low. With companies retaining significant pricing power, owing to robust demand conditions, output charge inflation climbed to a near five-year peak,” Lima said.
According to the survey, unrelenting inflation continued to concern businesses, who were cautiously optimistic about the year-ahead outlook for business activity. The overall level of sentiment was well below its long-run average as only 9 per cent of companies forecast output growth.
“Unrelenting inflation somewhat concerned service providers, who were cautious in their forecasts. On average, business activity is expected to increase over the course of the coming 12 months, but the overall level of sentiment remained historically low,” Lima said.
For the eleventh straight month, services sector witnessed an expansion in output. In Purchasing Managers’ Indexparlance, a print above 50 means expansion while a score below 50 denotes contraction
8 per cent of the total gross GST revenue.
Under the GST, a fourrate structure that exempts or imposes a low rate of tax of 5 per cent on essential items and a top rate of 28 per cent on cars is levied. The other slabs of tax rates are 12 per cent and 18 per cent. Besides, there is a special 3 per cent rate for gold, jewellery and precious stones and 1.5 per cent on cut and polished
On the job front, some companies responded to capacity pressures by hiring additional staff in June, but the vast majority (94 per cent) left payroll numbers unchanged. Overall, services employment rose marginally, following a decline in May.
Meanwhile, the S&P Global India Composite PMI Output Index — which measures combined services and manufacturing output — was at 58.2 in June, little changed from 58.3 in May. “Growth of Indian private sector output steadied in June, as a faster increase in services activity offset a slower rise in factory production,” the survey said.
On Thursday, the Reserve Bank of India (RBI) said the Indian economy is well on the path to recovery even though inflationary pressures and geopolitical risks warrant careful handling and close monitoring of the situation.
The RBI’s 25th Financial Stability Report (FSR) also said banks, as well as non-banking financial institutions, have sufficient capital buffers to withstand shocks. diamonds.
Also, a cess is levied on the highest tax slab of 28 per cent on luxury, sin and demerit goods. The collection from the cess goes to a separate corpus — Compensation fund — which is used to make up for revenue loss suffered by the state due to the rollout of GST.
On Monday, the revenue secretary said that the government intends to continue with the top GST slab of 28 per cent for luxury and sin goods, but is open to discuss narrowing down the three slabs of 5, 12 and 18 per cent into two.
Addressing the industry leaders, Bajaj said the rate rationalisation exercise of the GST Council is a result of introspection of GST, five years after its rollout, and the policymakers do not have a “fetish” to raise the tax rates to the revenue-neutral level of 15.5 per cent.
The secretary said the 28 per cent slab in GST contributes 16 per cent to the gross GST revenue, while the major chunk of 65 per cent comes from the 18 per cent slab