GST Council likely to cut rates on items with low revenue impact
12 July 2018
The Goods and Services Tax Council may consider a reduction in tax rates on a host of items with low revenue implications, as part of the tax rationalisation exercise in its next meeting on 21 July.
The items, which could be considered for cutting of tax rates, might include sanitary napkins, handicrafts and handloom goods, besides certain services. The decision comes after several industry bodies and stakeholders demanded a duty cut on items such as those linked to general health and employment generation in the unorganised sector.
The Council will take up the issue of rationalisation of taxes on various commodities in view of demands raised by stakeholders, a government official said. It would focus mainly on those items which are of general consumption, and have low revenue implication, the official added.
Most handloom and handicraft products, as well as sanitary napkins are currently taxed at 12 per cent, and there are demands to exempt them from the levy.
Under the GST regime, there are four rates – 5 per cent, 12 per cent, 18 per cent and 28 per cent.
Rolled out on 1 July 2017, GST had subsumed over a dozen local levies. The Council had, in its meeting in January 2018, decided to slash the GST rate on 54 services and 29 items.
In its November 2017 meeting, the Council had removed 178 items from the highest 28 per cent category, while cutting tax on all restaurants outside starred-hotels to 5 per cent.
In the first year of GST in 2017-18, the government earned Rs7,41,000 lakh crore from the tax since its roll out in July. The average monthly collection was Rs89,885 crore. In the current fiscal, the collections in April touched a record Rs1,03,000 crore, followed by Rs94,016 crore in May and Rs95,610 crore in June.
A review of the Goods and Services Tax (GST) that replaced the multi-layered, complex indirect tax structure with a simple, uniform, transparent and technology-driven tax system, after its first year of operation, reveals that public response has been mixed with some left confused about the digitised process and its norms.
The GST aimed at creating a unified system and was promptly hailed as the single biggest reform in the Indian taxation system, has come a long way since its 1 July 2017 launch.
The GST implementation did not bring about any significant inflation in the economy over the last one year. So, lending and borrowing rates have only increased marginally, contributing to a lot of stability.
Consumers saw a small increase in costs of purchasing financial products and availing financial services.
However, the GST rate of 18 per cent was higher than the earlier 15 per cent service tax slab. Services related to financial products like credit card, fund transfer, ATM transactions, processing fees on loans, etc – all are now taxed at 18 per cent post GST, up from 15 per cent (service taxes at 14.5 per cent + Krishi Kalyan cess and Swachh Bharat cess).