Rate rationalisation: Govt mulls same GST rate for similar product categories

The government is working towards aligning similar goods, classified under different Goods and Services Tax (GST) rates, into one particular tax slab, in a bid to avoid multiplicity of rates, which may lead to possible disputes, two senior government officials in know of the matter said.

For instance, dried fish attracts a 5 percent tax, while 0 percent tax is levied on whole fish (not fillet or frozen). Similarly, 28 percent tax is levied on chocolate syrup, while 18 percent of sugar syrup.

“There are some anomalies that we need to fix. The idea is to bring similar products under one particular tax slab,” one of the officials told Moneycontrol.

A committee of officers is currently doing the math as shifting a product into a lower tax slab could have revenue implications. The officials will present its recommendation to the GST Council in its next meeting on November 10 in Guwahati, the official said.

GST, billed as the country’s biggest indirect tax overhaul, has consolidated a dozen of state and centre duties into one single levy. All goods and services have been fitted into four broad slab structure –5, 12, 18 and 28 percent—along with a cess on luxury and demerit goods such as tobacco, pan masala and aerated drinks.

Since its implementation from July 1, the new indirect tax system has faced criticism owing to the teething troubles including lack of clarity on return filing, higher rates for some categories and major technical snags on the information technology portal GST Network (GSTN), among others.

GST Council, which is the apex decision-making body in the new tax regime, has addressed a number of issues, particularly providing relief to small and medium firms and exporters grappling with procedural irritants, delayed refunds and technical glitches on returns filing.

The Council has also rationalised rates of over 100 items and non-sin items under the 28 percent slab could also be brought down to a lower rate.

“There are industries where 95 percent of production used to take place in MSME and all of them used to avail excise duty exemption. So, that means the excise rate we have taken for that item is only theoretical in nature and actually we have done a substantial increase in the rate of that item. That way it is being pointed out that it is a theoretical rate, which has been derived, there is a need for rationalisation. Instead of doing a piecemeal reduction here and there, we do need to look at the entire rate of 28 percent,” Revenue Secretary Hasmukh Adhia had said last week at a GST town hall organised by CNBC TV18.

Earlier this month, the Council approved a concept note laying down the principle for fixing rates of goods and services

“As revenue increases, future rates will be tailored accordingly,” Finance minister Arun Jaitley had said.


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