GST Council meeting being held today may deliberate on the further rationalisation of the GST rate structure. The council, being chaired by the Finance Minister Arun Jaitley and comprising his state representatives, will supposedly be discussing tax rates cuts on construction items such as cement. Tax on cement has been a significant industry concern, while the rate cuts will cost a whopping Rs. 7,000 to Rs. 8,000 crores to the Centre and States.
Also, the GST rate on housing is likely to be slashed from 12% to 8% to bring it on par with the affordable housing. Another proposal is made to reduce these rates to 5% without an option to claim the tax credit on the inputs used.
Sources say that the rate cut discussion on other products like air conditioners, computer monitors and power banks are plausible this meeting.
“The idea is to retain only those items in the 28 per cent slab which are used for the luxury purpose and demerit goods. The Council will take the final call,” Economic Times quoted an official telling PTI.
Initially, there were over 220 goods in the 28 per cent tax slab, when the Goods and Services Tax (GST) was implemented from 1st July 2017. The council has slashed tax rates on 191 goods over a year and a half, leaving only 35 items under its net. This bucket now only includes cement, automobile parts, automobile equipment, tyres, motor vehicles, yachts, aircraft, aerated drinks, betting and demerit items like tobacco, cigarette and pan masala, to mention a few.
EY Tax Partner Abhishek Jain quoted to Economic Times: “While a general expectation has always been for restricting the 28 per cent rate list to only luxury or sin goods, before a further pruning of this list, the Government may coherently analyse the revenue impact of the same”.
PM Narendra Modi recently stated that Government is committed to bringing 99% of the items below the 18% tax bracket. This statement has received mixed responses from all quarters.
While the revenue from GST looks less likely to meet the set targets for this fiscal, the Centre with the GST council will be taking a cautious call here. Meanwhile, the construction industry has been making demands on multiple forums, for a rate rationalisation considering that the inputs like cement bear a higher tax rate when compared to the taxability of the properties. Even though an option for a refund of GST is present, this system has led to gaps in working capital which is primarily affecting MSMEs operating in this sector.
Annapoorna, popularly known as Anna, is an aspiring Chartered Accountant with a flair for GST. She spends most of her day Singing hymns to the tune of jee-es-tee! Well, not most of her day, just now and then.