CBIC Chairman: Three-slab GST a Strong Possibility
By: Admin
July 25, 2024
Categories: GST Recent News
Reconstituted Group of Ministers (GoM) is currently engaged in a comprehensive review of the Goods and Services Tax (GST) structure in India. Central Board of Indirect Taxes Chairman Sanjay Kumar Agarwal has indicated that the group is evaluating various aspects of rate rationalization under GST and will soon submit a detailed report. The objective is to assess the necessity of overhauling the existing GST rate structure and potentially streamlining the number of GST slabs from the current four (5%, 12%, 18%, and 28%) to a more simplified three-slab system.
Finance Minister Nirmala Sitharaman recently highlighted the importance of rate rationalization during the upcoming GST Council meeting in August. The GoM, led by Bihar’s Deputy Chief Minister Samrat Choudhary, will present its findings and proposals aimed at addressing the unfinished agenda related to GST rates.
Agarwal emphasized the government’s goal of achieving revenue neutrality through GST, aiming for a sustainable weighted average rate that prevents significant drops in revenue collection. Initially set at 15% during GST’s introduction, the Revenue Neutral Rate (RNR) has decreased to approximately 11% by 2019 as GST rates on many products were reduced over time.
In addition to GST reforms, the government is also focusing on rectifying the inverted duty structure within customs duties. Agarwal acknowledged the complexity of this issue, stating that what appears to be an inverted structure might not always be the case, necessitating a thorough evaluation of the value of each component within a finished product.
Furthermore, the government announced plans for a comprehensive review of the customs duty rate structure to simplify and rationalize it, aiming to facilitate trade, eliminate duty inversion, and minimize disputes. Recent adjustments in customs duties, such as those on mobile phones, electronics, gold, silver, critical minerals, leather, and certain chemicals, reflect ongoing efforts to support local manufacturing.
Regarding the 28% GST levy on the “full face value of bets” in online gaming, Agarwal indicated that the current framework appears effective based on the substantial increase in tax revenues from the industry post-October 2023. Monthly tax revenues from online gaming rose significantly from Rs 250 crore to about Rs 1,150 crore, suggesting no immediate need for revision.
Industry stakeholders and tax experts have consistently advocated for correcting the inverted duty structure in customs, pointing out that manufacturers often face higher import duties on raw materials and intermediate goods compared to finished products. This situation arises due to government policies aimed at promoting domestic sourcing but does not always align with manufacturers’ reliance on imported materials.
In conclusion, while the GoM continues its deliberations on GST rate rationalization and customs duty reforms, the overarching goal remains achieving a balanced tax regime that supports economic growth, promotes local manufacturing, and ensures sustainable revenue collection for the government.
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