NEW DELHI: Days after Prime Minister Narendra Modi announced that GST on 99 per cent of goods and services would be brought under the tax bracket of 18 per cent or lower, the GST Council on Saturday decided to slash indirect tax on two dozen items. These include popular items such as movie tickets, televisions and religious travel, among others. The reduced rates would be applicable from January 1, 2019.
However, the move was not as big as expected as the government, which is staring at a revenue shortfall of Rs 60,000 crore in the first nine months of the current financial year, wanted to play it safe. That’s why some price-sensitive items like cement and auto parts are still kept in the 28 per cent slab despite widespread demand to cut tax on such items.
“Cutting rates on cement and auto parts would cost the exchequer Rs 13,000 crore and Rs 20,000 crore loss, respectively. We will take this up when we can afford to let go this revenue,” Finance Minister Arun Jaitley said.
The GST Council moved six items from the 28 per cent slab to 18 per cent. GST on some auto component items were brought down from 28 per cent to 18 per cent, but rates on some others were left unchanged at 28 percent.
Saturday’s GST rate could cost the exchequer an annual revenue loss of Rs 5,500 crore. This could further complicate matters for the government, which is struggling to meet the budgeted target of Rs 13.48 lakh crore in GST revenue by collecting over Rs 1 lakh crore a month. However, tax mop-up has crossed Rs 1 lakh crore only twice — in April and October.
While the government is beaming at the middle class with the rate cuts, industry had expected more as PM Modi had promised to cut taxation on almost all goods and services below 18 per cent.
Even as the Centre has decided to bite the bullet, most of the Opposition-ruled states are reportedly upset with the rate cuts because of the impact on revenues.
According to sources, Congress-ruled Chattisgarh and Rajasthan sent only officers to attend the GST Council, while Madhya Pradesh did not even bother to send a representative. Kerala and West Bengal were of the opinion this was not the right time to cut rates.
With the country getting into a poll mode soon, more generous cuts are likely in the next GST Council meeting in January 2019.
Jaitley has already said the issue of real estate and small traders will be taken up in the next GST council meeting in January.