The re-constituted Group of Minister (GoM) is looking into various aspects of rate rationalisation under the GST, and it will submit a report on whether there is a need to revamp the GST rate structure, and examine the requirement of converging GST slabs, Central Board of Indirect Taxes Chairman Sanjay Kumar Agarwal said on Wednesday.

In an interview with FE, Agarwal said that some discussion on rationalising slabs is going on, and a three slab GST structure is “very much a possibility”. Presently the GST structure has four slabs – 5%, 12%, 18%, and 28%.

Finance minister Nirmala Sitharaman, last month, had said after the GST Council would take up the “important agenda” of rate rationalisation at the next meeting, likely in August. The re-constituted Group of Ministers on this, headed by Bihar deputy chief minister Samrat Choudhary, would make a detailed presentation on the work done so far and the unfinished agenda in the next meeting of the Council, the minister said.

Agarwal mentioned that the endeavour of the government is to achieve “revenue neutrality” with respect to GST, which means achieving a weighted average rate, under which there is no “major fall” in revenue collections of the government on a sustainable basis. The RNR during the introduction of GST was determined at 15%, which subsequently reduced to around 11% (by 2019) as GST rates on many products came down, he mentioned. 

On correcting the inverted duty structure within customs, Agarwal said that it’s much easier said than done. “Many times what we consider as inversion is not so. We have to check what’s the value of a particular item in a finished product.” 

The government announced in the Budget that a comprehensive review of the customs duty rate structure will be undertaken over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion, and reduction of disputes.

Sitharaman on Tuesday

announced a rejig in customs duty on many products including mobile phones and electronics, gold, silver, critical minerals, leather and certain chemicals to support local manufacturing.

“In case, one items’ duty is higher than the rate of the finished product, you may do its inversion – but its value in the finished product is only 5%,” the Chairman explained, while adding that correcting inversion is not always possible.

Having said that, work is going on to correct it, wherever we can, said Agarwal. “We have received many proposals from the industry, but we have found that many don’t have merit.”

Source: The Financial Express