Sources say that the Centre may not restructure the Goods and Services Tax (GST) slabs amid key state elections due in the 2023 and 2024 general selections.
Even though the Group of Ministers (GoM) on GST rates rationalisation was required to submit a report by September ’22 end, it is not in a hurry to submit the same as there’s not much push from the Centre for restructuring GST rates and slabs.
After state assembly elections in Himachal Pradesh and Gujarat at the end of 2022; polls will be conducted in nine more states in 2023, including Chattisgarh, Karnataka, Madhya Pradesh, Telangana and Rajasthan. After that, the momentum for the 2024 general elections will pick up.
Recently, RBI announced that the Consumer Price Index (CPI) inflation rose 7.14% in September ’22, which is very far from the medium-term target of 2-6%. RBI estimated that the CPI inflation could average 6.7% per cent in FY 2022-23 compared with 5.5% in FY 2021-22.
Also, recently the finance ministry stated that the geopolitical conflicts might intensify and reignite the supply-chain pressures that have eased recently and can lead to an increase in inflation rather than a decline. The Centre and most states believe that the GST rates and slabs need to be changed, and some exemptions are to be removed.
Earlier, Revenue Secretary said that the government might continue with the highest GST rate of 28% on sin/luxury goods and explore the possibility of merging the remaining three major slabs, 5%, 12% and 18%, into two slabs.
It is expected that the 12% slab having an 8% share in GST revenues, and the 18% slab having 65% share slabs, might be merged into a new slab of 15% and the 5% slab having a 10% share in GST revenues slab can be replaced with a new slab of 6% or 7%.
The government can not suddenly increase the 5% slab as it includes necessities such as food and medicines. Also, dropping the 18% slab to 5% will result in a huge revenue loss. Hence, these transitions shall be done gradually but not in one go.
The Council, which meets at least once a quarter, haven’t met July-September’22 as planned due to a delay in submitting reports by GoM on race courses, casinos, and online gaming along with setting up GST Appellate Tribunal (GSTAT). The Council could meet in late November’22 or early December’22.
While GST rate changes may not be on the agenda, Council shall focus on a few changes related to the e-invoicing extension, GST Tribunal, anti-profiteering authority, etc.
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DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.