Ahead of the goods and services tax (GST) council meeting, industry body CII on Tuesday sought early conclusion of the rate rationalisation process in a meeting with finance minister Nirmala Sitharaman, sources said.
In the meeting on further GST reforms, the industry body also suggested subsuming all petroleum products under GST, relaxations in input tax credit to ease working capital issues and streamlining of audit processes, sources said.
The GST Council may meet in June or July with a heavy agenda to discuss the much-awaited rate rationalisation, simplification and the future of compensation cess.
The Council, chaired by finance minister, will examine the group of ministers (GoM) report on rate rationalisation to give further relief to people through rate reductions and rejig of the number of slabs. The GoM headed by Bihar deputy chief minister Samrat Chaudhary submitted its report in December 2024.
On the table would also be a proposal to reduce the health and life insurance tax rate to 5% from 18% while retaining the input tax credit.
The inclusion of petroleum products under the GST regime is a complex issue with potential benefits and drawbacks. While industry bodies advocate for bringing these products under GST to simplify the tax system and potentially reduce prices, state governments have concerns about revenue implications. Petroleum products like crude oil, petrol, diesel, natural gas, and aviation turbine fuel remain outside the GST purview.
Currently, there are four major GST slabs – 5%, 12%, 18% and 28%. The Central Board of Indirect Taxes & Customs (CBIC) was assessing the feasibility of the GST slab rejig by merging 12% and 18% to a single rate of 14% or 15% or 16% with revenue implications in each scenario.
The GoM on Compensation Cess, headed by minister of state for finance Pankaj Chaudhary, is looking into the future of compensation cess beyond March 2026.
As of now, the cess is being levied on luxury and sin goods but is being utilised only for paying back loans taken during the Covid to make good the loss to states in guaranteed GST revenues.
The GoM would be suggesting how to retain the revenue from cess in some form and how it is to be shared between the Centre and the states.
Source: The Financial Express
