GST rates may get political tinge in election year

GST rates may get political tinge in election year
Highlights

The goods and services tax GST may undergo further rationlisation as the general elections near, because the incumbent dispensation could attempt to show empathy towards the common man and small traders, its core vote base

New Delhi: The goods and services tax (GST) may undergo further rationlisation as the general elections near, because the incumbent dispensation could attempt to show empathy towards the common man and small traders, its core vote base.

Though the January meeting of the GST council may not have this on the agenda, where cement rate could be lowered, grounds for further GST rationalisation are being prepared without waiting for revenues to stabilise, sources said. Once rates are standardised, the 15 per cent rate, envisaged by finance minister Arun Jaitley, would be up for discussion and both the slabs (12 per cent and 18 per cent) would cease to exist. To counter the states’ revenue impact argument, the Centre has started asserting — though not that openly at the moment — that any standard rate above 12 per cent would neutralise their losses.

However, the GST council’s fitment committee would take a final decision with all states on board, sources said.

Earlier the finance minister said the idea (15 per cent rate) would have to await stabilisation of revenue flows. Niti Aayog also has backed this figure in its inputs to the finance ministry. The political angle to the move to make the GST council deliberate it could be the Congress bid to hijack the single rate issue ahead of the general elections.

The single rate gained momentum following the finance minister talking about it after prime minister Narendra Modi spoke of simplifying GST rates further and put 99 per cent of items in the 18 per cent or below that GST slab.

Though BJP-ruled states still outnumber states ruled by other parties, winning GST council’s approval for the move would not be an easy task. The recent decision on cement rate demonstrated states’ stand on opposing any free-run to the Centre citing revenue implications.

According to a SBI research report, indirect tax mop-up in FY19 may fall short by Rs 90,000 crore.

The next GST council meeting is scheduled in January where a new composition scheme will be framed for small services providers. Taxation on lottery is also on the meeting agenda. At present, GST on state-organised lotteries is 12 per cent and state-authorised lotteries 28 per cent. The 32nd council meet will also take up the MSME threshold limit.

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