Categorical view on GST: Points left unaddressed, council wants to supply resolutions

In its fifty fifth assembly, the GST council deferred taking a choice on a number of urgent points. These included the demand for reducing the tax on well being and life insurance coverage and on the meals supply fees of platform aggregators. Alongside, the Group of Ministers (GoM) wanting into the contentious concern of price rationalisation sought extra time, whereas one other wanting into the matter of the compensation cess was additionally given an extension. Whereas there have been different suggestions by the council on penal fees levied by monetary establishments, fortified rice kernels and the sale of used automobiles, among the clarifications that it did present solely served to spotlight the eccentricities of the a number of price construction underneath the Items and Companies Tax.

The council clarified that popcorn with salt and spices could be taxed at 5 per cent GST. Whether it is pre-packaged and labelled the tax could be levied at 12 per cent. And whether it is combined with sugar then at 18 per cent. This oddity, nonetheless, is just not a one-off. Beneath this oblique tax framework, there are quite a few examples of classification and categorisation of products and providers the place totally different tax charges are imposed. As an example, just a few months in the past, D Srinivasan, Managing Director of Coimbatore’s Annapoorna Resorts, had raised the difficulty of the distinction charges at which buns and cream buns had been taxed. Previously, a distinction has additionally been drawn been packed/frozen parathas and rotis. India stands out as one of many few nations with such a posh oblique tax construction. Of 115 nations, solely 5 – Ghana, India, Italy, Luxembourg and Pakistan – have 4 or extra GST slabs as per the World Financial institution’s India Growth Replace 2018. Twenty-eight had two charges, whereas 49 levied a single price. A multiple-level price construction solely raises the compliance burden, will increase the area for bureaucratic discretion, and goes in opposition to the need to enhance the benefit of doing enterprise within the nation.

The necessity for endeavor price rationalisation — to probably embody analyzing not solely the classification of things but in addition scale back the variety of tax slabs and the difficulty of income neutrality — was mentioned within the GST council in its forty fifth assembly in September 2021. The GoM on cess was constituted in its 54th assembly in September — the levy of the cess has been prolonged until March 2026 to repay the loans taken throughout the pandemic. These points needs to be resolved shortly. The council, which has already taken a number of steps to plug the gaps within the system, should quickly arrive at a consensus on these points.

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