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GST GoM defers meeting, will submit final report to Council next month

Some state FMs had raised concerns over impact of any major rate changes. Some had also cited concerns about inflationary impact.

By: ENS Economic Bureau | New Delhi |
November 27, 2021 4:31:06 am
The Council is now expected to hold a meeting in December.

The Group of Ministers constituted to review the current rate slab structure under the Goods and Services Tax (GST) regime has deferred its final meeting on November 27 to discuss various proposals for rate rationalisation and measures to shore up revenues. The ministerial panel is now expected to directly submit its report to the GST Council, which may not reflect the concerns raised by some states over recommendations of major rate tweaks by an officer-level fitment committee.

The officer-level fitment committee is learnt to have recommended raising of tax rates from 5 per cent to 7 per cent and 18 per cent to 20 per cent, for which some state finance ministers had raised concerns over impact of such major rate changes. Some states had cited concerns about the inflationary impact of any such major rate hikes, especially in the aftermath of Covid. With some states holding an opposite view, recommendations of the fitment committee were not likely to be accepted in total in the GoM meeting. The Council is now expected to hold a meeting in December.

The Group of Ministers (GoM) on rate rationalisation, headed by Karnataka Chief Minister Basavaraj Bommai, also includes West Bengal principal chief advisor to the Chief Minister and the finance department Amit Mitra, Kerala Finance Minister K N Balagopal, and Bihar Deputy Chief Minister Tarkishore Prasad, had met twice so far and was scheduled to meet on November 27 to consider recommendations of the Fitment committee regarding GST rate and slab changes.

Over its last two meetings, the GoM has reviewed items under an inverted duty structure to help minimise refund payout. The inverted duty structure, wherein the tax rate on output is less than the rate on inputs, has been corrected for textiles and footwear by hiking the GST rates for them. After the previous Council meeting in September, two ministerial panels were constituted for spelling out a blueprint for GST reforms. The panels’ brief incorporates an overarching mandate: an evaluation of “special rates” within the tax structure, rationalisation measures that include “a merger of tax rate slabs for simplifying the rate structure”, alongside a review of instances of inverted duty structure and an identification of potential sources of evasion to shore up revenues. The GST has five key slabs: zero, 5 per cent, 12 per cent, 18 per cent and 28 per cent. A compensation cess, ranging between 1 per cent and 290 per cent, is levied on demerit and luxury goods over and above 28 per cent. The merger of 12 per cent and 18 per cent slabs was considered earlier but never taken up formally by the Council.

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