With a new coalition government at the helm, a key economic reform involving GST rate rationalisation may be further delayed. Many experts feel that as rate rejig impacts inflation, there may be pressure to not undertake it at all. However, there is a section that feels there is still hope for this long-pending reform.

A seven-member committee under the convenorship of Suresh Kumar Khanna (Finance Minister, Uttar Pradesh) has been working on rate rationalisation exercise for 1,200 category of goods and all services, excluding those in negative list. Once the committee gives its report, the Fitment Committee will discuss and finalise the agenda for the GST Council. Based on the recommendations of the Council, the Centre and States (including three Union Territories with assemblies) will notify rates.

One of the key proposals has been to bring down number of main rates to three from four . This could mean new rate by merging either 12 per cent and 18 per cent to 15 per cent or 5 per cent and 12 per cent to 8 per cent.  Although some items would become cheaper, many items would move to upper rate bracket and result in inflation. This argument deferred the rationalisation in the past and now experts feel it will be very difficult to take such an exercise.

Source: The Hindu Business line