Rationalisation of GST rate on the anvil: CEA

K V Subramanian

New Delhi: Chief Economic Adviser (CEA) KV Subramanian on Thursday said rationalisation of GST rate structure is on the government’s agenda and it is definitely going to happen.

Further, he said a three-rate structure is very important and there is also a need to fix inverted duty structure as far as the GST is concerned.

The Goods and Services Tax (GST), which amalgamates more than a dozen central and state levies like excise duty, service tax and VAT, was introduced in July 2017. GST currently has five rate structures – 0.25 per cent, 5 per cent, 12 per cent, 18 per cent and 28 per cent.

To a question if rate structure rationalisation under GST needed, Subramanian said, I think that’s something definitely going to happen. The original plan was to have a three-rate structure. But I think what we have to be very cognizant about is that often times with policy-making you don’t want perfect to actually become the enemy of the excellent.

A majority of common use items have been exempted from GST, while 28 per cent tax is levied on luxury, demerit and ‘sin goods.’

The GST, the way it got created with actually five rates was basically excellent because now we are seeing the impact on GST’s amounts that are coming in…the policymakers then must be given credit for actually being practical enough to say, let’s get it going first, he said at a virtual event organised by industry body Assocham.

The three-rate structure is something… definitely important and even the inverted duty structure (is) also equally important to actually fix. I think the government is definitely seized of the matter. So we should hopefully see traction on that soon, he said.

GST collection slipped below Rs 1 lakh crore in June for the first time in eight months as the second wave of the Covid pandemic and the resultant lockdowns hit businesses and the economy. At Rs 92,849 cr, GST collection was the lowest in 10 months since August 2020, when it was Rs 86,449 cr. The GST collections in June 2021 are primarily for supplies made in May – a month when most states were under different levels of lockdown, reducing business activity.


NT Bureau