GST Council meeting unlikely this month as some issues couldn't be taken up

The Goods and Services (GST) Council meeting may not happen this month as some key issues, like rate rationalisation, couldn’t be taken up. Moreover, the Group of Ministers (GoM) is yet to take any view on this.

The panel was expected to submit a report by last month and suggest various steps to raise revenue, including hiking the lowest slab and rationalising the slab. Currently, GST is a four-tier structure attracting tax rates of 5, 12, 18, and 28 per cent.

“The last two meetings didn’t reach any conclusion plus no fresh meeting is slated so far,” two state finance ministers, also members of the panel, told Business Standard.

The earlier two meetings remained inconclusive as GoM felt it required more deliberations, keeping in mind the prevailing high commodity prices and their impact,” said one of the panel members.

The slabs recast would have raised the weighted average GST rate to the revenue-neutral level of over 15 per cent, from the present-day 11 per cent.

“It is difficult to raise taxes or tinker with the current slabs. Merging the two rates (of 12 and 18 per cent) is challenging and may be done after taking a lot of internal and external factors into account, '' said a senior government official.

In the meantime, the government expects the uptick in revenue collection figures, particularly from indirect taxes, to continue.

Last fiscal year, the Centre collected Rs 12.9 trillion in indirect taxes, taking the total revenue count to a record Rs 27.07 trillion.

March had witnessed the highest-ever GST mop-up to Rs 1.42 trillion. The government is hopeful of achieving Rs 1.5 trillion in the first quarter of the current fiscal year (2022-23).

Another official indicated that the next GST Council meeting could be held in May since Finance Minister Nirmala Sitharaman is scheduled to visit the US between April 18 and April 27.  She is attending meetings at the Group of Twenty, International Monetary Fund, and World Bank. Most of the meetings are in Washington DC.

For the GST Council meeting, states require prior intimation of at least seven days.

Meanwhile, the fitment committee — led by tax officials from the Centre and states, who had met last week — has had discussions on various issues, including pruning the exemption list and correcting the inverted duty structure. Besides, it also deliberated briefly on increasing the lowest slab to 6/7 per cent, from the current 5 per cent.

Essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury and sin goods attract cess on top of the highest 28 per cent slab. This cess collection is used to compensate states for the revenue loss due to GST roll-out.

However, rate correction of electric vehicles, tractors, and agricultural items are not on the cards, according to an official.

Experts, however, feel that an overhaul in GST slabs is the need of the hour.

Bipin Sapra, partner, EY, said, “The industry is looking at a rate rationalisation exercise to provide relief on a number of issues currently waiting to be resolved. Any increase in rate at this stage without rationalising the entire rate structure will create more inefficiencies,” said Sapra.