The keenly-watched plan to rework the GST rates may have been pushed a bit down the road, but a lot has been going on in the background, ToI reported on August 27. The Group of Ministers (GoM) tasked with resetting rates is conducting a thorough review of various categories, including items in the 12% and 18% brackets. They plan to make decisions on several products and services toward the end of September, the report (by Sidhartha) said.
The ministers are focusing on sectors such as health insurance and restaurants, where the industry has made representations. There could also be adjustments to some food products where branded and packed goods have different rates compared to unpacked ones. These changes may extend to items such as namkeens.
While many items currently fall into the 12% bracket, there isn’t significant revenue coming from this slab. In contrast, 73% of the taxes are collected from the 18% bracket. Sources explained that a reduction of even three percentage points in this slab could result in a substantial revenue loss.
Given the current political environment, it is difficult for ministers to increase the levies on items in the 12% bracket.
As a result, most of the ministers in the GoM on rate rationalisation, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, opted to leave the slabs unchanged. This decision is likely to be conveyed to the GST Council in its meeting on September 9. Other rate changes, focused on specific goods and services, will be worked out in the coming weeks and then presented to the GST Council.
Despite strong lobbying from online gaming companies for a review of the 28% levy, an immediate change is unlikely. Several states and the Centre argue that a high tax rate acts as a deterrent, especially as many gamers are losing large amounts of money.
Similarly, the demand from the beverages industry may relate to the broader issue of deciding the future of compensation cess.
Industry players have requested that the rate changes be limited to twice a year to prevent vendors from facing difficulties due to frequent changes in levies after supplying goods and services.
“Industry players have demanded that instead of undertaking frequent changes, the rate tweaks should be restricted to twice a year so that the vendors do not suffer due to the change in levies after they have supplied the goods and services,” ToI said quoting an industry representative.
