The Centre and states may implement a proposed structural reform in phases to minimise the impact of the tax rate changes on consumption under Goods and Services Tax (GST) regime.
As reported by ET, a group of ministers (GoM) led by Karnataka Chief Minister is likely to meet soon to finalise the restructuring recommendations. The final recommendations will be taken up in upcoming GST council meeting.
However, the restructuring will be implemented in phases, may cut down tax exemptions, introduce only three major tax slabs and remove anomalies from taxing raw materials and intermediates, reported Live Mint.
Further, the revisions may include the implementation of tax rate changes needed in the textile industry that will correct the inverted duty structure. Several items in the textile and apparel sector were deferred a rate hike from 5 percent to 12 percent by the GST council on 31st December, 2021. These included woven fabrics of cotton, silk, and wool, coir mats, apparel, and clothing accessories worth a sale value of Rs 1,000. The rate hike was to take effect from 1st January, 2022.
“The main concern of states is the expiry of GST compensation in June. Even though the cess collection has been extended, it will only raise adequate resources for paying back the loans already raised. The only way out is to augment revenue from GST, which can be done in one of two ways. It can be done administratively, or you make your rate structure efficient, that is, remove exemptions, cut duty inversions, and reduce the number of slabs,” an official told Live Mint.
Policymakers and experts are optimistic about the restructuring. They believe cutting down GST rate slabs will help businesses. As per the tax experts, GST collections currently are showing an encouraging trend. Thus, this may be the right time to consider simplifying the rate structure.