High GST collections open door for rate rationalisation, say experts
High GST collections open door for rate rationalisation, say experts
Karthik Mani - Partner - Indirect Tax
With monthly Goods and Services Tax (GST) collections now consistently above ₹2 lakh crore, tax experts believe the timing is right for a major rationalisation of India's indirect tax structure, including the possible removal of the 12% slab
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Speaking to CNBC-TV18, MS Mani, Partner at Deloitte India, said the revenue share going to states from GST collections has improved significantly.
“When we say GST collections are at ₹2 lakh crore, a large part of that goes to the states. So, to some extent, concerns around revenue are addressed,” he said, suggesting that states may be more willing to support the Centre’s reform proposal than in the past.
A key part of the proposal being considered for the upcoming GST Council meeting involves reducing the number of GST slabs from four to three by merging the 12% rate with the 5% and 18% rates in a revenue-neutral way. MS Mani argued that this move would simplify compliance, especially for small businesses.
Saurabh Agarwal, Partner at EY India, said the 12% slab currently includes a wide range of items such as packaged food, furniture, household goods, diagnostic kits, and construction material. He sees scope for significant downward movement in food products and even suggested the possibility of lowering GST on term and health insurance from 18% to 5%.
Karthik Mani of BDO India echoed the need for simplification, particularly for MSMEs in sectors like textiles and footwear that face complicated classifications. He said simplification would ease compliance and benefit both states and industry.
The next GST Council meeting is expected before the monsoon session begins on 21 July, and the Centre is hoping the current momentum and broad-based benefits of simplification will help build consensus among states.
Q: GST collections are now above ₹2 lakh crore a month. As both our guests have pointed out, revenue concerns seem addressed. Apart from rate rationalisation, other issues like compensation cess simplification are also on the table. What else can be done to balance rationalisation with state concerns?
Karthik Mani: The discussion on rate rationalisation has been going on for a long time. A couple of years ago, a committee was formed to address rate rationalisation in textiles, but after lobbying, the plan was dropped.
Now, as MS Mani mentioned, the revenue concerns of states have largely been addressed. Earlier, that was the main hurdle. Today, the focus can shift to helping MSMEs. Sectors like textiles or footwear have very cumbersome classification systems—based on product price, for example—that determine whether GST is 5%, 12%, or 18%. This creates challenges for MSMEs.
Simplifying the rates by moving items from 12% to 5% or 18% will ease compliance, help MSMEs grow, and create balance. I believe states and the industry both stand to benefit.
CNBC
.
Speaking to CNBC-TV18, MS Mani, Partner at Deloitte India, said the revenue share going to states from GST collections has improved significantly.
“When we say GST collections are at ₹2 lakh crore, a large part of that goes to the states. So, to some extent, concerns around revenue are addressed,” he said, suggesting that states may be more willing to support the Centre’s reform proposal than in the past.
A key part of the proposal being considered for the upcoming GST Council meeting involves reducing the number of GST slabs from four to three by merging the 12% rate with the 5% and 18% rates in a revenue-neutral way. MS Mani argued that this move would simplify compliance, especially for small businesses.
Saurabh Agarwal, Partner at EY India, said the 12% slab currently includes a wide range of items such as packaged food, furniture, household goods, diagnostic kits, and construction material. He sees scope for significant downward movement in food products and even suggested the possibility of lowering GST on term and health insurance from 18% to 5%.
Karthik Mani of BDO India echoed the need for simplification, particularly for MSMEs in sectors like textiles and footwear that face complicated classifications. He said simplification would ease compliance and benefit both states and industry.
The next GST Council meeting is expected before the monsoon session begins on 21 July, and the Centre is hoping the current momentum and broad-based benefits of simplification will help build consensus among states.
Q: GST collections are now above ₹2 lakh crore a month. As both our guests have pointed out, revenue concerns seem addressed. Apart from rate rationalisation, other issues like compensation cess simplification are also on the table. What else can be done to balance rationalisation with state concerns?
Karthik Mani: The discussion on rate rationalisation has been going on for a long time. A couple of years ago, a committee was formed to address rate rationalisation in textiles, but after lobbying, the plan was dropped.
Now, as MS Mani mentioned, the revenue concerns of states have largely been addressed. Earlier, that was the main hurdle. Today, the focus can shift to helping MSMEs. Sectors like textiles or footwear have very cumbersome classification systems—based on product price, for example—that determine whether GST is 5%, 12%, or 18%. This creates challenges for MSMEs.
Simplifying the rates by moving items from 12% to 5% or 18% will ease compliance, help MSMEs grow, and create balance. I believe states and the industry both stand to benefit.
CNBC