Amid growing disillusionment over the GST roll-out, the government on Tuesday hinted that the list of items in the highest tax bracket of 28 per cent could be thinned down and tax rates could be “subsequently” into two slabs and finally converged into one.
Admitting that many items had unnecessarily got into the list of highest tax bracket, a top source in the government said many items in the list could be taken out step by step. “Subsequently, we will shift to dual slab of 12 per cent and 18 per cent in future and it could be a single slab also in future,” the source said.
Agreeing with this Kerala finance minister Thomas Isaac, a member of the GST Council, said some of the intermediate items should not be in the higher tax bracket. “Some of the intermediate items such as tiles, paver tiles and building materials should be removed from the higher tax bracket. The luxury products which used to suffer 32-40 per cent tax in the pre-GST period are justified in this bracket. But there is no justification for these items to be there, “ Isaac told The Indian Express.
The source in the Central government pointed out that the items on which 12 per cent VAT, 14 per cent excise, 2 per cent cess and with cascading tax effect had automatically gone into the 28 per cent bracket. “Some of them need not be in the high tax bracket. This will be corrected,” he said. Under the GST regime implemented from July, over 1,200 products and services have been fitted into one of the 5, 12, 18 and 28 per cent tax slabs based on the principle of keeping the total tax incidence at almost the same level as previously as well as keeping revenue collections neutral. He, however, ruled out the possibility of bringing petroleum products into the ambit of GST, saying the “states will not agree to it.”
This came on a day when finance minister Arun Jaitley hinted at pruning the list of items in the highest GST tax bracket of 28 per cent after revenue in the new regime equalise collections previously.
“We have been gradually bringing them down. The whole idea is, as your revenue collections neutralise we must prune it and that’s the pattern in which the Council has so far been functioning. I see that as a future guide as far as the Council is concerned,” Jaitley said at the India Today Conclave.
The GST Council in the last 3-4 meetings has slashed rates on over 100 items, thereby bringing them down either from 28 per cent to 18 per cent or from 18 per cent to 12 per cent. The GST Council is scheduled to meet next on November 10 ad may consider lowering tax rates on a host of goods such as handmade furniture, plastic products and daily use items like shampoo.
The Council last month approved an Approach Paper to be followed by the fitment committee while deciding on future rate revisions. Sources said the GST council is expected to trim the list in the 28 per cent tax slab by shifting some items of common use and the products made by SMEs to a lower tax rate bracket.
When the GST Council meets on Friday in Guwahati, some of the members are also expected to criticise the “knee-jerk reactions” of the government in the implementation of the new tax regime. “No one is working out the revenue implication. The structure of GST is being eroded by the knee jerk reactions and the compromises made by the government,” said a state official.
The government has been under fire from the Opposition over the GST implementation. The ruling party’s cadre has also expressed apprehensions over the public anger over the initial hiccups in the roll out of the new tax regime. However, the government has assured that the structural reform measures it has taken would ultimately benefit the economy.