NEW DELHI: In view of declining Goods and Services Tax (GST) collections from states threatening their finances, the Central government is gearing up to review GST. It intends to reconsider the tax structure, increase tax slabs of non-essential and lifestyle items and consider bringing more items into the GST net.
“The biggest concern is falling cess from states. There are many items that are exempted from GST. The suggestion is to bring more items to the 5 per cent bracket. The 5 per cent tax slab accounts for Rs 1,20,000 crore annually, and it will not have much impact on the consumer’s pocket,” a senior official from the GST Council said.
According to the official, internal assessment shows that compensation cess collections have averaged around Rs 7,500-8,000 crore per month and the amount to be paid as compensation to states has gone up to Rs 11,500 crore so far in FY20. If there’s no improvement, the compensation cess will fall short by November-December.
The government on Thursday had set up a 12-member high-level committee of officers to look into the revenue shortfall being faced by the states and suggest measures for augmenting collections.
The 12-member panel, which will have five members from the Centre and states each, will submit its first report within 15 days to the GST Council Secretariat. The panel has commissioners from the state GST councils of Punjab, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal, along with the joint secretary and executive vice-president of GST Council. They will look into issues such as systematic changes in GST to prevent misuse, measures to expand tax base, improved compliance monitoring and anti-evasion measures using better data analytics and better administrative coordination.
While finance ministers of West Bengal and Kerala had been more vocal on their concerns about falling revenues, even BJP-ruled states had expressed their anxiety.