It looks like the services sector has been a drag on GST collections. Finance Minister Arun Jaitley told the media after the conclusion of 31st GST Council meeting in New Delhi on Saturday that collection from manufacturing has been good but it is the services sector that has shown muted collection.
According to him collections in telecom and airlines sectors have been bad because of excessive competition in both sectors impacting overall performance of the two sectors. Jaitley said these two sectors account for a large chunk of GST collection. He also said that competition in the two sectors is beyond the control of the GST Council and hence it cannot do anything about it.
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Another reason for collection from services sector being slowdown in the real estate sector. Jaitley attributed to this slowdown partly to the fact that under-construction apartments attract 12 per cent GST, and fully constructed apartments attract no GST. "The impression among home buyers is that they have to pay 12 per cent GST on under-construction flats without realising the fact base price of apartments should come down due to input tax credit available to builders."
The council is now deliberating on bringing down the rate on under-construction apartments to 5 per cent without the benefit of input tax credit.
He also attributed the poor collection in the services sector to fewer small service providers coming under the GST fold. He cited unavailability of composition scheme for small service providers a reason for this.
To address this issue, the GST council is now considering composition scheme for small service providers. However, the rates and modalities of the scheme is yet to be announced.
It is an old demand from services sector to allow small service providers in the composition scheme. Right now the composition scheme is available only for small manufacturers and traders.
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