GST Council asks states’ opinion on GST Rate hikes for 143 items; Centre denies reports

The GST Council that recommends, the authority that suggests rate rationalisation, has sought the opinion of states. 

It aims to increase the GST rate on approximately 143 items, including washbasins, ceramic sinks, power banks, colour TV sets (below 32 inches), non-alcoholic beverages, jaggery, papad, suitcases, handbags, watches, perfumes or deodorants, custard powder, walnuts, chewing gums, goggles, frames for spectacles/goggles, leather-based apparel and clothing accessories.

92% of the 143 items proposed for the GST rate hike may be moved from the 18% tax bracket to the highest tax slab of 28%. At the same time, items such as papad and jaggery may be shifted from nil to a 5% tax rate slab. On the other hand, the GST rate on walnuts may be hiked from 5% to 12%. Further, the GST rate on custard powder could go up from 5% to 18%, while the GST on table and kitchen wood can rise from 12% to 18%.

A section of the media reports that the GST Council has communicated with states on the GST rate hike proposals. It wants to get collective input about the repercussions of the rate hike from the states.

A state government official revealed that a few items could see rate reversal in cases where the manufacturers have not passed on the rate cut benefits to consumers. However, the GST rates must remain unchanged for other commonly used items.

The rate reversal is for correcting the past rate rationalisation activities around the time of the 2019 Union Election in November 2017 and December 2018. In 2017, only 50 items were kept under the highest tax slab of 28%. Close to 178 items were shifted to lower tax brackets, including restaurants. These measures led to a revenue loss of Rs.20,000 crore for the government. 

Furthermore, the rate reduction for more than 350 items out of the 1,211 total across the various tax slabs under GST resulted in an annual revenue loss pegged at Rs.70,000 crore.

However, in a surprising u-turn, the Finance Ministry has claimed that it has not approached any states for taking feedback on the GST rate hike proposal. The ministry further reported to the media publications that the GST Council had set up a GST rate rationalisation committee. It is yet to submit its report, and accordingly, the Ministry takes no action.

For any clarifications/feedback on the topic, please contact the writer at annapoorna.m@cleartax.in