Eighteen months after the rollout of the goods and services tax, the government had to revise rates and exempt or issue clarifications on close to 400 of the 1,216 items under the new indirect tax levy. The reduction in rates of 23 items by the GST Council in its meeting on December 22 has been preceded by at least four rounds of rate reviews on July 21 and January 18 this year, and November 10 and October 6 last year.
An analysis by BusinessLine showed that the GST rates on over 370 goods and services have been reviewed over the last 18 months, and at least 50 clarifications have been issued by government authorities on the rates of various products.
“While there has been an extensive movement of products across rate slabs after the introduction of the GST, these movements have helped businesses in having very reasonable rates for many products compared to the pre-GST situation. Since the intention is to eventually converge the 12 per cent and 18 per cent slabs into one rate, these movements serve as steps in that direction, " said MS Mani, Partner, Deloitte India.
With just 28 items now left in the highest tax bracket of 28 per cent, Finance Minister Arun Jaitley has also indicated more reviews of GST rates going ahead, as the next stage of reforms would be to converge the 18 per cent and 12 per cent tax slabs into a standard rate of 15 per cent.
“We transiently put them in the 28 per cent slab. As the revenues kept increasing, we started bringing down the rates,” Jaitley said in a recent post.
Impact on fiscal deficit
Revenue losses are still a concern under GST— with average monthly collections pegged at about ?97,100 crore — and could result in some fiscal slippage. The fiscal deficit by November-end this year amounted to 114.8 per cent of the Budget estimate.
“It (the rate changes) will have an impact on the fiscal deficit situation. They are already short of the targeted revenue collections from the GST and further reduction of rates will hurt the fiscal position. But then they should not have set the revenue targets so high if it was the intention to lower the rates over 18 months,” former Finance Minister P Chidambaram told BusinessLine. “In April-November 2018, Central GST collections stood at a relatively moderate 49 per cent of the Budget estimate for 2018-19, which suggests an impending shortfall relative to the level budgeted by the government for this fiscal. The provisional settlement of the Integrated GST, as well as residual GST compensation cess (after disbursal to states) will be key in augmenting the Centre’s cash flows in the coming months,” said Aditi Nayar, Principal Economist, ICRA.
Source :- Thehindubusinessline.com