The highest slab of 28 per cent under the goods and services tax (GST) could be restricted to luxury and sin goods, a top tax official said on Saturday, a day after the GST Council reduced the rates on 27 items amid concerns over the new tax proving to be inflationary at the start. While a month ago the council had reduced the tax rates on 30 items and few others earlier, finance minister Arun Jaitley subsequently hinted at a shift to fewer tax slabs once GST’s revenue-neutrality is clearly established.
The GST Council has come to view the 28 per cent rate to be “unnecessarily high” on various daily-use items, Central Board of Excise and Customs (CBEC) chairman Mahender Singh said at an event in the capital. Stating that many items came under higher tax rates, as the council went by the criterion of equivalence with the pre-GST rates, Singh said it was perhaps wrong to adopt that norm (pre-GST rates on several items were higher than warranted because many states taxed certain items heavily).
In the next meeting, the council could take up a proposal to allow the services sector to choose the composition scheme, which allows paying tax at a small percentage of the turnover without scrutiny. This, and whether to allow units with inter-state sales to opt for the composition scheme, would be considered by a GoM that would submit its report to the Council in two weeks.
The reverse charge mechanism under GST was suspended till the end of the fiscal by the council on Saturday, based on a report from tax officials in industrial states. Singh said nearly 100 officials deputed in Gujarat to collect RCM had said it was not working for many businesses. He added that the council would address these issues before bringing the provision back.
Speaking at the same event, GST Network CEO Prakash Kumar said over 90 lakh taxpayers had registered till Friday.
(With Inputs from FE)