In its December meeting, the GST Council is likely to focus on rate rationalisation and suggest ways for revenue augmentation. Though the date for the meeting has not been finalised, it could take place immediately after the Winter Session of Parliament.

The session is scheduled to end on December 23. ‘Rules of Procedure and Conduct of Business in the GST Council’ prescribe the meeting to take place at least once in every quarter of the financial year. Last meeting of the Council took place on September 17.

As on date, there are multiple rates comprising four main – 5, 12, 18 and 28 per cent – and some special rates such as 0, 0.25, 1 and 3 per cent. There has been thinking for a long time to bring down the number of rates and one idea was to merge 12 per cent and 18 per cent and prescribe a consolidated rate of 15 per cent. Various other combinations are also under consideration.

A Group of Ministers is reviewing the current rate slab structure including special rates. The group, under the convenorship of Karnataka Chief Minister Basavraj S Bommai, has been asked to recommend the rationalisation measures, including merger of tax rate slabs, required for a simple rate structure. This group was constituted on September 24 and was asked to submit its report within 2 months.

“It is expected that GoM’s report will be ready before the next meeting, so that the Council could consider and decide the next course of action,” a senior Finance Ministry official told BusinessLine. The GoM is expected to suggest changes that may be implemented immediately and the roadmap for implementation for the changes that should be implemented in the short and medium term.

Other terms

Other terms of reference for the GoM on rate rationalisation include review of the supply of goods and services exempt under GST with an objective to expand the tax base and eliminate breaking of ITC (Input Tax Credit) chain and review the instances of inverted duty structure.

Inverted Duty Structure refers to higher duty on inputs and lower duty on output. This results in a higher refund to the industry which affects the cash flows for companies and revenue collections for the Government. Also, consumers do not gain anything. Last year, the council corrected IDS on mobile handset while this September, it decided to correct this anomaly on textile and footwear from January 1, 2022.

Manali bhanushali
Author: Manali bhanushali

Manali Bhanushali