After the Goods and Services Tax (GST) Council, at its 10 November meeting in Guwahati removed 178 items from the highest 28 per cent tax slab, senior government officials have indicated that there will be no further rejigged in rates before March 2018.
An official said, “At the last meeting already a major overhaul has been done. We will now at least wait for six months to see the revenue stream before considering any rationalisation of rates.”
Since the measures taken at the 23rd GST Council meeting are expected to cost the exchequer around Rs 20,000 crore, further rationalisation on the remaining items by the fitment committee in the slabs of 5, 12 and 18 per cent will be taken up only after the stabilisation of revenues, the official added. Sources said the government will stick to its decision to retain cement at the 28 per cent slab.
They said the pre-GST incidence of tax on cement was around 31 per cent. There will be a revenue loss of Rs 10,000 crore if cement is shifted to the 18 per cent slab and at present, the government is not ready to take the burden. Karnataka finance minister Krishna Gowda earlier said the tax collections from GST are nowhere close to expectations.
“With all states falling short of the expected targets and obtaining compensation, the pressure on government finances is severe, creating legitimate doubts about its capacity to manage fiscal deficit and usher a growth-oriented GST. Around Rs 8,000 crore is being collected per month for compensation to all the states in the country.”
He added that there is no clarity on where the Centre will manage its shortfall and whether this will result in raising other taxes. It is largely perceived that the Council headed by Union finance minister Arun Jaitley has lowered the rates on items due to upcoming elections in Gujarat, where most businesses are facing difficulties in conducting transactions under the new GST regime.
The Opposition Congress Party has said the Gujarat polls had forced the Centre to consider its suggestions and experts’ advice. However, on 22 October, former Revenue Secretary and present Finance Secretary Hasmukh Adhia said GST rates need to be overhauled to reduce the burden on small businesses. He said this will help small businessmen comply with the new rules and accept the GST regime better.