No tax slab, rate changes; GST Council may take up inverted duty structure

The Goods and Services Tax (GST) Council is unlikely to take up rationalisation of tax slabs or tax rates in its next meeting, scheduled to be held in March. It, however, is likely to address the issue of inverted duty structure in the meeting.  

The 15th Finance Commission has recommended a three slab structure for GST. The government has been wanting to merge 12 per cent and 18 per cent GST slab to a mid-way slab of around 15 per cent for long, but has been waiting for revenue to stabilise.  

Also read: GST mop-up rises 8% to Rs 1.20 lakh crore record high in Jan

"There will be no slab overhaul in the upcoming meeting as the government is still waiting for the revenue to stabilise, especially after the disruptions caused by the pandemic," a source close to the development told Business Today on condition of anonymity. The source also ruled out any changes to tax rationalisation on items under various slabs.  

The monthly GST collections have now bounced back from COVID lows. In January, GST collection touched an all-time high of Rs 1,20,000 crore, almost four times of COVID low of about Rs 35,000 crore witnessed in the month of May last year.  

Also read: GST compensation shortfall: Centre releases Rs 1 lakh crore to states since October 2020

The Ministry of Finance, however, plans to address inverted duty structure under GST in the upcoming meeting. "Inverted duty structure is one of the top priorities of the government and is likely to be taken up by the Council in the next meeting," a top finance ministry official told Business Today.

Inverted duty structure is a situation when GST paid on inputs is more than the GST paid on the outward supplies.  

Certain sectors like fabrics are facing problems as inversion in duty rates has created working capital challenges for taxpayers in the sector. Working capital crunch on account of inverted duty is seen hurting the small and medium organisations. The Finance Ministry is keen to correct the situation. The final date for GST Council meeting has not been decided yet.  

Also read: Reduce GST,  create separate department for auto sector: Parliamentary panel to Centre