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GST exemption items: Govt sets up ministerial panels to review tax slabs
The government has set up a task force on system changes to uncover potential sources of GST evasion.
Two committees of state finance ministers have been formed by the Finance Ministry to rethink rate slabs, assess GST exempt items, and identify potential evasion sources.
The seven-member panel, led by Karnataka Chief Minister Basavaraj Bommai and including West Bengal Finance Minister Amit Mitra, Kerala Finance Minister K N Balagopal, and others, will examine the supply of GST-exempt goods and services with the goal of expanding the tax base and eliminating ITC chain breaks.
It would also examine the current tax slab rates and make recommendations for modifications.
The Group of Ministers (GoM) on rate rationalisation will also examine items with an inverted duty structure to help reduce rebate payouts, as well as the supply of goods and services exempt from GST, with the goal of expanding the tax base and preventing the ITC chain from being broken.
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According to the Finance Ministry, the GoM may propose modifications that can be adopted immediately, with a short- to long-term implementation roadmap. In addition, the panel might produce an interim report with rapid suggestions.
Four years after the national Goods and Services Tax (GST) replaced the complicated indirect tax structure, the federal government and states have begun work on a “simpler rate structure under GST” by assessing current rate slabs, including special rates and rate slab mergers.
The GST has a four-rate system that exempts or charges a low rate of 5% on basic commodities and a peak rate of 28% on automobiles. The other two tax brackets are 12 and 18 percent. Furthermore, a 28 percent cess on luxury, demerit, and sin goods is placed on the highest slab.
To balance the impact of slab rationalisation on income, some have suggested merging the 12 and 18 percent slabs and removing specific items from the exempt list.
The GST Council has previously remedied the rate anomaly in the instance of mobile handsets, footwear, and textiles due to the inverted duty structure. The ministerial group will now examine representations of inverted duty structures and recommend appropriate rates to eliminate any circumstances where final goods are taxed at a lower rate than their inputs.
Aside from that, the finance ministry formed a new Group of Ministers (GoM) on GST system reforms to identify potential sources of evasion and recommend improvements to business processes and IT systems to stop revenue leakage.
The eight-member council would comprise Delhi Deputy Chief Minister Manish Sisodia, Tamil Nadu Finance Minister Palanivel Thiaga Rajan, and Chhattisgarh Finance Minister T S Singh Deo, and would be led by Maharashtra Deputy Chief Minister Ajit Pawar.
The panel would review IT tools and interfaces available to tax officers and suggest ways to make them more effective, identify possible uses of data analysis for better tax compliance, and suggest ways to improve coordination between central and state tax officers, and make recommendations to the council on a regular basis.
On September 17, the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, decided to establish these two GoMs.