FM Nirmala Sitharaman has stated that the GST council will now take up any revision of GST rates as a yearly exercise. The statement about the government’s decision was made in a post-budget interaction with reporters in Kolkata.
FM also said that a frequent change in the GST rates has given rise to an inverted tax structure in the GST system; this has resulted in the raw materials getting costlier in comparison to the finished products, which then results in tax refund delays and other issues. If the tax rate of an item is reduced, it results in a ripple effect affecting refunds.
Businesses have stated earlier that they find it difficult to account for the tax provisions for a given financial year. Similarly, it becomes difficult for the government to correctly evaluate the targeted GST revenue for the entire financial year.
Frequent amendment of GST rates leads to uncertainty and thus, the decision of having a single revision annually was welcomed as this would bring stability to the GST system. It has been suggested that the time of revision should coincide with the Union Budget, so as to help businesses adapt to the rate changes in terms of stock-keeping and invoicing. The move will further help in promoting the ease of doing business in India.
A committee was formed in order to examine the three-rate GST structure in the 38th GST Council meeting. The tax rates for certain items had been reconsidered for a hike, as the official data had hinted at a steep shrink in the supply of consumer goods by 18% in October 2019. FM has frequently requested industries to raise their concerns regarding rate revisions to the state, who can in-turn take it up in council meetings.
Sources have said that the GST Council would meet in February end to decide on GST rate structure revision. The government is planning to merge the lower rates of 5% and 12% into 12%, leaving the 18% and 28% unchanged. This would help in streamlining the GST regime to eventually have three slabs.