GST overhaul likely to limit rate slabs to just 2

15 November 2017

The GST rates that saw a major downward revision last week, are in for further streamlining, and could possibly end up with only two slabs instead of the current four slabs, two senior members of the GST Councils have indicated

However, the reduction in GST rates on around 200 items, including those for hotels and restaurants to 5 per cent from 12 per cent earlier, has not yet been fully passed on to the consumers.

While eating out at AC and non-AC restaurants should be cheaper from today, it is not known whether hotels and restaurants are passing on the benefits of lower tax rates to the consumer.

Earlier the centre had indicated that the industry had not passed on the benefit of input tax credit by cutting prices.

However, since the rate has come down restaurants cannot charge higher tax rates on customers, although the overall bill may remain the same.

The reductions in GST rates announced by the GST Council after a meeting last Friday, is applicable from today, 15 November.

''GST is not a pain for consumers and customers. As far as consumers are concerned, we want them to go into the nitty-gritty, the details of the GST - on most of the items, the rates have been reduced; on more than 80 per cent of the items, what was the earlier rate has come down from pre-GST to post-GST. So as far as the consumer is concerned, they go to a store and they purchase any item and possibly pay less now for it, but yes, visibility is a problem,'' NDTV quoted  Sushil Kumar Modi, deputy chief minister of Bihar and member of the GST Council, as saying.

The problem with GST is that it fails to highlight the difference with the earlier indirect tax regime.

A bag of cement is taxed at 28 per cent now against 31 per cent earlier as it included both excise and VAT. Now thanks to GST only 28 per cent tax is applicable.

For the consumer, however, the excise part was never an issue. He was only concerned with the VAT, which was very low compared to GST. The excise part was not visible.

This is the case with most items and both manufacturers and distributors as also restaurants are not ready to forgo the advantage of having the benefits of input tax credit and low GST rates.

As of now, the MRP of an item priced say lower than Rs10,000 or 15,000 does not show the breakup of taxes, only the final value that includes taxes also will be visible.

So the visibility of the excise duty, which was not there earlier, and passing on the benefit to consumers are the issues that we will work to resolve next.

While on many items, the prices have come down, the difference is only 2-4 per cent, so the customer may find it tough to recognise that the item is now cheaper. Now there is also a tendency of profiteering, so an anti-profiteering committee has been formed.

In Kerala, the committee has received more than 150 complaints of the benefits of lower taxes not being passed on to customers, so in every state, an anti-profiteering committee has been formed, Modi said.

He said the GST Council has been reducing tax rates on 30-40 items at every meeting over the last four months, adding, still there is scope for rationalisation - but not much, because after this Guwahati meeting, more than 175 food items have been transferred from 28 per cent slab to the 18 per cent slab.

Stating that it was difficult to have one common slab for all items, Modi pointed out that of the 170 or 180 countries that have gone through GST, only Singapore has one slab of 7 per cent and it is a very small country.

Even in the European Union, there are more than five or six rates. France has different slabs of 19-25 per cent. But as and when we will observe revenue buoyancy, we will act.

So ultimately, the country will move to a two or three slab structure, but it will take much more time. I think slowly, when the system of GST stabilizes and when the revenue buoyancy will be there, then we can take a call slowly on moving some items from 28 to 18 per cent or on having only two slabs: 6-7 per cent and 15 per cent - but all these things will take a much longer time.

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