GoM on GST rate rejig to meet tomorrow, may seek extension to submit report

The ministerial panel, headed by Karnataka CM Basavaraj Bommai, will be meeting for the second time since it was set up in September last year

An empowered group of ministers (GoM) — set up to look into rate rationalisation — may seek an extension of three to six months to submit its report on restructuring of the Goods and Services Tax (GST) slabs, in its upcoming meeting on June 17, according to the people in know.

The ministerial panel, headed by Karnataka Chief Minister Basavaraj Bommai, will be meeting for the second time since it was set up in September last year. 

The panel was tasked to submit a rate rejig report in two months. In December, the panel was given time till March-end, but was delayed on account of elevated inflation.

“Rationalisation of rates is complex and requires a lot of deliberation. It has been felt that any such restructuring should not be done until inflationary pressure eases,” a government official said.

The virtual meeting, scheduled on Friday, may discuss the removal of GST exemptions on certain goods and services, along with correcting inverted duty on certain value chains. On rate rejig, it may seek more time to deliberate upon, said one of the two people cited above.

The panel mandate is to review the current GST tax slab rates and consider raising the lowest threshold slab under GST to 7 per cent or 8 per cent, from the current 5 per cent, besides changing other tax categories.

There are four major GST slabs as of now – 5 per cent, 12 per cent, 18 per cent and 28 per cent. A clutch of sin goods in the 28 per cent bracket attract cesses as well. 

The Council, which is expected to meet late this month or early next month, may take up the GoM recommendations on exempt goods and removing anomalies from taxing raw material higher than finished goods, depending on the suggestions, a source said.

The panel could take up the exempt list of items, such as unbranded and unpacked foods, which currently do not attract GST.

An inverted duty structure arises when the GST rate for raw material is higher than that for the finished product, resulting in the accumulation of input tax credit (ITC), which affects the cash flow of companies.

As far as the inverted duty structure across several value chains is concerned, correcting those on items like textile does not seem easy. In December last year, the Council deferred a rate hike from 5 per cent to 12 per cent on several items in the textile and apparel sector, including woven fabrics of cotton, silk and wool, coir mats, apparel, and clothing accessories of sale value up to Rs 1,000, which was to take effect from January 1.