Amid falling GST collection, tax rates may be raised next week

With pressure on revenue collection, the goods and services tax (GST) rates and slabs may be raised during the GST Council meeting next week.

A group of officers from the Centre and states, which met on Tuesday to finalise recommendations for rate rationalisation, is said to have considered various options including raising rates from 5% to 8% and 12% to 15%, sources said.

The Council can explore possibility of merger of slabs to bring down the number of slabs to three, sources said.

According to a Hindustan Times report, the GST slabs could be changed to three, that is, 8%, 18%, and 28%. The report quotes two government officials familiar with the matter who did not want to be named.

As of now, there are four slabs under the GST regime -- 5%, 12%, 18% and 28%. Goods and services under the 28 per cent category also attract cess over and above the rate, which ranges between 1% and 25%.

The report also said that the tax rate for products such as branded cereals, mobile phones, pizzas, air travel, AC rail travel, cruises, high-end hospital rooms, paintings, branded garments, and fine fabrics may be raised.

In the meantime, the mobile phone manufacturers' body India Cellular and Electronics Association of India (ICEA) has sought "rationalisation" of GST rate to 5% from existing 12% for entry level mobile handsets costing up to Rs 1,200, reports IANS.

The Central GST collection fell short of the Budget Estimate by nearly 40% during the April-November period of 2019-20, according to government data. The actual CGST collection during April-November stood at Rs 3,28,365 crore, while the Budget Estimate is of Rs 5,26,000 crore for these months.

In 2018-19, the actual CGST collection stood at Rs 4,57,534 crore as against the provisional estimate of Rs 6,03,900 crore for the year, he said. In 2017-18, the CGST collection was Rs 2,03,261 crore.

Meanwhile, India's GDP growth slumped to a 26-quarter low of 4.5% in the second quarter of the current financial year as gross value added to the manufacturing sector contracted for the first time in nine quarters. The last time GDP grew at a slower pace was in the fourth quarter of 2012-13, when it had expanded only 4.3%.

The compensation requirements have increased significantly and are unlikely to be met from the compensation cess being collected. This discussion is quite critical as lower GST and compensation cess collections have been a matter of concern in the past few months, according to a letter written by the GST Council to commissioner, SGST, of all states. The Council has sought suggestions, inputs or proposals as regards measures, on compliance as well as rates that would help in augmenting revenue.

The GST Council, headed by Finance Minister Nirmala Sitharaman is scheduled to meet on December 18. This meeting will come against the backdrop of a lower-than-expected GST collection and pending compensation to many states.

(With inputs from agencies)

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