NEW DELHI: The ministerial panel on GST rate rationalisation is weighing lower rates for several mass-use items, including medicines and tractors, to 5%, while leaving the tax on products, such as cement, unchanged.
Lower revenue from tractors, which currently face 12% or 28% GST depending on their classification, may partly be compensated by an increase in GST on high-end EVs, that cost upwards of Rs 40 lakh and are imported, from the current 5%, a source familiar with the discussions told TOI.
A reduction in GST on health and term insurance is, however, imminent. The only question is what the rate will be. Health covers could see the tax rate drop from 18% to 12%, while term insurance may attract 5% GST, amid suggestions of putting in the ‘nil’ rate segment. But a zero rate would mean that those who supply goods and services to life insurance companies may not get input tax credit, making it an unattractive proposition for them. As a result, 5% GST on term insurance appears to be a safer bet.
Although a reduction in the number of slabs from four to three is unlikely, the ministerial panel headed by Bihar deputy CM Samrat Chaudhary, is looking to reduce the number of items in the 12% bracket. Which means some of the items may be pushed into the 5% slab, while there would be others that can move to 18% as part of a slow transition to a three-rate structure.
Things are likely to be clearer by the month-end as the panel on insurance, also headed by Chaudhary, is scheduled to meet on Oct 19, while the one on rate rationalisation will discuss item-wise details a day later. By then the officials in the fitment committee would have also worked out the details.
While several state FMs in the GoM (group of ministers) have indicated their willingness for a three-rate structure, Kerala, Karnataka and West Bengal are backing a status quo. In fact, Kerala FM K N Balagopal is seen to be more reluctant than his peers when it comes to lower rates, despite the Opposition seeking to blame the BJP-led govt at the Centre for the levies. The southern state’s poor finances may be a reason for the reluctance.
Revenue loss is going to be a key consideration for the states and the GoM is cognizant of the pressures. For instance, lowering rates on medicines from 12% to 5% will leave an over Rs 11,000 crore hole for the Centre and the states. Similarly, health insurance fetches over Rs 8,000 crore GST. The 18% and the 28% slabs are the main revenue generators, with the latter accounting for 72-73% of the collections.
But, fears of cartelisation in certain industries is also coming to their disadvantage. For instance, cement is likely to be left untouched at 28%, given the industry’s track record at fixing prices. Similarly, revenue implications will also weigh on sin goods, such as cigarette, soft drinks and even packed namkeen.
#Panel #considers #GST #massuse #items #Times #India
