Consistent good growth in GST collections from domestic sources is likely to nudge the GST Council to effect a rate rejig in its next meeting. The Council is supposed to meet once in three months and its last meeting took place on December 21 which means the next meeting will be scheduled next month.
Finance Minister Nirmala Sitharaman on Saturday said work on rationalising tax rates and slabs is almost finalised and the matter will be taken up in next meeting of the council. Addressing an event in Mumbai, she said that the revenue neutral rate (RNR) has come down from 15.8 per cent at the time of the launch of GST on July 1, 2017, to 11.4 per cent in 2023. “It will come down even further down,” the minister added.
Excess collections
Data from GSTN showed that barring December, collections through domestic sources during the last five months have been in the excess of ₹1.40 lakh crore. During these five months, collections clocked 10 per cent growth thrice. Significantly, despite 28 days in February, collections were over ₹1.40 lakh crore with over 10 per cent growth. Another important issue is that e way bill generation during last three months including February has been more than 11.15 crore, which could have some impact on the collections in March too. It may be noted that under GST, a registered person cannot transport goods in a vehicle whose value exceeds ₹50,000 (Single Invoice/bill/delivery challan) without e way bill.
“The consistent rise in domestic GST revenue compared to import-related collections points to the effective implementation of the Atmanirbhar Bharat policies. Furthermore, the government’s increased disbursement of domestic and export refunds, including those related to inverted duty structures, demonstrates its commitment to easing working capital pressures on businesses. This trend suggests a potential move towards resolving inverted duty issues across various sectors in a short run, which would streamline administrative processes for both the government and taxpayers,” said Saurabh Agarwal, Tax Partner at EY India.
The GST Council, headed by Sitharaman and comprising her State counterparts, in September 2021, set up a group of ministers (GoM) to rationalise GST rates and suggest changes in slabs. The GoM comprises finance ministers of 6 States.
“Now, at this stage, there is one more look that I would (take), the groups (GoM) have done excellent work, but I still have taken it upon myself to, once more, completely review each of the groups’ works, and then probably take it to take it to the Council to see if we can come to a final conclusion on this,” she said while adding that some more work is required on rate rationalisation.
“We’ll take it to the next council (meeting). We are very close to coming to a final call on some of the very critical issues, reduction, rationalisation of rates, looking at the number of slabs and so on,” she said.
As of now, GST system has four general rates (5, 12, 18 and 28 per cent) and four special rates 0 per cent 0.25 per cent, 1 per cent and 3 per cent. Also, there is cess (1 to 22 per cent) on some goods such as automobile over and above GST rate of 28 per cent.
