The GST Council is ready to cut down the items from the list of maximum tax slab of 28% by moving some products of daily usage and products from SMEs (Small and Medium Enterprises) to another lesser tax slab.
The tax rate adjustment committee, combining a panel of state and central official supporting the GST council, is strictly scrutinizing the list of the highest slab to find out those items to cut down from 28% slab, said by anonymous people with the knowledge of the go-arounds in development procedure.
To give further relief to Small and Medium Enterprises, the GST Council wants to consider the public thoughts over high tax rate items of daily usage and items produced by SMEs, which includes labor work. As per Ministry of MSMEs (Micro, Small, and Medium enterprises) data, India has approx 56 million SMEs.
One of the anonymous people said, “Besides, SMEs contribute only about 5% to the total indirect tax revenue. Hence giving relief to them may not hit revenue collection. The idea is to ease the pain, not to dilute GST structure.”
As per the thumb rule of the revenue department, 80% of total taxpayers render only 20% of the collected tax revenue, and the rest small section which includes 20% of taxpayers contribute the major share of tax revenue.
The roadblocks for the GST council is that the GST rates are applied to all without concerning their respective sales. One of the anonymous officials said, “The same product may be manufactured by large industry players as well as SMEs. In such cases, a rate cut will affect revenue receipts from the bigger players too although they need no such relief.”
M.S. Mani, Partner, Deloitte India, suggested that it is required to reconsider at some of the common products which are categorized under the 28% subsequent tax bracket. He said, “While the rates were decided by the fitment committee considering the pre-GST excise and VAT (value added tax) rates, there appear to be some cases where the GST rates are optically high and need to be reconsidered.”
The 23rd meeting of the GST Council chaired by the FM is going to take place in Guwahati on 9 and 10 November to discuss further amending the liberal tax filing or composition scheme on a quarterly basis for small and medium enterprises.
Various items were put into the 28% slab rate because at the time of including items in the list of different slab rates, the effective tax load on those items pertaining the central excise and state VAT was to the extent of 23-25%. The GST council has moved many items from higher tax slab to lower tax slab till now.
In the 22nd GST Council meeting, the council has moved many items such as stationery items, paper clips, stones used in flooring excluding granite, poster colors, parts of pumps, and some diesel engine parts from 28% slab to lower tax slabs. There are various slabs which include 5%, 12%, 18%, and 28% slabs and extra cess imposition on some items in the highest tax slab.
The government should stop tinkering with the slabs for the rates, instead, if it is getting enough revenue. It should reduce the GST from 28% & 18% to 24% & 16% keeping 12% and 5% intact.