Tax rates on 30-40 items across various slabs may be cut, with the GST Council set to approve wide-ranging changes in laws to further simplify the indirect tax system in its next meeting on Saturday.
Items such as sanitary napkins, handlooms, and handicrafts among others, may be brought to a lower tax slab, a source in know of the matter said, adding that the final decision will be taken by the all-powerful GST Council in its 28th meeting in New Delhi.
With more entities coming under the tax net and increasing compliance – a rate cut on some of these commodities may not have a major impact on the revenue, the source said.
Last week, Finance Minister Piyush Goyal had said that the Council may look at rationalising tax rates on some items on the basis of ‘meritorious reason’ after ensuring right balance with revenue collection.
“GST Council has already reduced rates on 328 items, so you may possibly find some chance (of rate reduction) where there is a meritorious reason. It has to be in balance with revenue consideration,” Goyal had said.
Contrary to the expectations, some goods attracting the highest tax rate of 28 percent may not immediately get cheaper as the Centre and the states may have to take a substantial hit in terms of their revenue collection.
GST has four broad tax slabs – 5, 12, 18 and 28 percent – apart from a three percent tax on gold and other precious stones. Currently, there are only 49 items in the 28 percent tax slab. Since its implementation from July 1, 2017, the Council has time and again slashed tax rates on several goods and services, with the last round of rate rationalisation in the meeting in January.
Crucial changes in the law are also on the anvil as the Council is expected to approve 46 categories of amendments in GST-related laws, with a broader idea to reduce compliance burden, simplify the indirect tax system and bring more entities under the tax net.
Amendments such as enabling new return filing procedures, omission of liability to pay tax on the reverse charge, allowing more service providers to opt for composition scheme, changes in input tax credit norms and refund rules, among others have been suggested.
Two reports, on the implementation of 1 percent additional agriculture cess and on deferring incentives on digital payments will also be submitted by ministerial panels for the Council’s approval.
The inclusion of natural gas and aviation turbine fuel under the ambit of GST may not be taken up for the time being in the Saturday meet.