CHANDIGARH: Finance Minister Nirmala Sitharaman on Wednesday said any hike in GST rates as part of rate rationalization exercise is aimed at compensating for “inefficiencies” in the value chain.
Stating that all states are aware of the potential impact of rate rationalization on inflation, Sitharaman said any increase in tax rates will also meet the tax burden, which may be borne by some other activities in that value chain. Used to be.
Sitharaman told reporters, “Technology can correct anomalies to account for inefficiencies and hence may have a potential impact on revenue collection. But the revenue-neutral rate of the RBI study has been breached to the detriment of the system. .. it demands reform…” The 47th Council meeting was held here.
According to an RBI study, the weighted average tax rate under the Goods and Services Tax (GST) has come down to 11.6 per cent from 14.4 per cent at the time of launch.
According to the Subramaniam Committee report, the revenue-neutral rate under GST should be around 15.5 per cent, which was introduced before the GST launch.
Sitharaman said that in some cases huge refunds are being given due to reversal of duty and this needs to be rectified.
“As a result of which you are again sitting on potential tax yield points that have been omitted. It is not the efficiency of the system. Therefore, rate rationalization, even if it results in growth, is making up for… The kind of inefficiencies that have come to the fore now or the collateral being afforded by some other activity in that value chain,” she said.
Therefore, rate rationalization is something that the Group of Ministers (GoM) is looking at from this point of view as well, Sitharaman said.
Inefficiencies in the taxation system come when inputs and final products are taxed at different rates, leading to either tax evasion or business entities not being able to fully utilize input tax credit.
The GST Council, chaired by the Union Finance Minister and State Finance Ministers, in its 47th meeting, chaired by Karnataka Chief Minister Basavaraj Bommai, approved the GoM’s interim report on rate rationalization.
The council also gave an extension of 3 months to the panel to submit a complete report on rate rationalization and possible tax slab merger under GST.
Asked about the possible impact of the rate hike on inflation, Sitharaman said inflation is not a particular state concern.
“All the ministers (in the council) are aware. They are all looking after the system. Hence, the decisions taken by the council are not as if they are being taken separately. Elected representatives who are part of the GST council , are fully conscious…,” she said.
“There was no opposition from any state to the hike in rates,” Sitharaman said.
The panel, in its interim report, which has now been approved by the council, has suggested removal of GST exemptions on several items and rectification of duty reversal in some cases. The changes will be effective from July 18.
So, frozen, fish, yogurt, cottage cheese, honey, dried legumes vegetables, dried makhana, wheat and other cereals, wheat or meslin flour, jaggery, murmura (muri), all goods and organic manure except, pre-packaged and labeled Wala meat and coir pith manure will not be exempted from GST and will attract five per cent tax from July 18.
Similarly, 18 per cent GST will be levied on charges charged by banks for issuance of checks (in lost or booked form). Maps and charts, including atlases, will attract a levy of 12 per cent, while goods that are unpacked, unlabeled and unbranded will be exempt from GST.
Also, hotel rooms priced below Rs 1,000/day will be taxed at 12 per cent against the tax exemption at present.
In addition, reverse charges will also be rectified for several items including edible oil, coal, LED lamps, printing/drawing inks, finished leather and solar water heaters.
The council also approved the report of the fitment committee of officers of the central and state governments to make changes in tax rates on certain items.
tax rates for orthopedic implants (trauma to the body, spine and arthroplasty implants); orthoses (splints, braces, belts and calipers); The prosthesis (prosthesis) will be cut from the existing differential rate of 12 and 5 per cent to a uniform five per cent.
The committee also recommended reduction of GST on ropeway travel from 18 per cent to 5 per cent and on ostomy devices from 12 per cent to 5 per cent.
The GST on Tetra Pack will also be increased to 18 per cent from the existing 12 per cent.