NEW DELHI: Even as the 45th GST Council meeting increased taxes on many goods and services, it is probably just the beginning of more rate ‘rationalisation’ if the statement by the finance minister, who was speaking with the media after the GST Council meeting on Friday, is anything to go by. While explaining the reason for not extending compensation to states beyond June 2022, the finance minister said in the press briefing that the Revenue Neutral Rate (RNR) prescribed at the time of Implementation of GST was 15.3% but the weightage average GST rate currently is only 11.6%. “We made a presentation in the meeting to apprise the states of the revenue situation,” finance minister Nirmala Sitharaman said.
The Centre seems to have managed to convince the states given the lack of outrage from the latter.
While the Council has decided to set up a Group of Minister (GoM) to rationalise the rates and review exemptions from the point of view of revenue augmentation, the GST Council decided to increase GST on a number of items during the meeting in Lucknow.
GST on ores of iron, copper, aluminium increased from 5% to 18%; specified renewable energy devices and their parts increased from 5% to 12%; rate on cartons, boxes, bags increased from 12% to 18%; parts and locomotives changed from 12% to 18%. GST on licensing to broadcast films also raised from 12% to 18%.
Many of these rate hikes are part of the policy to correct the inverted duty structure, under which the GST on inputs is higher than the GST on output. This leads to accumulation of unutilised input tax credit.
GST rate changes in order to correct inverted duty structure, in footwear and textiles sector, as was discussed in earlier GST Council Meeting. It was decided to implement the changes from 1 January 2022. When the GST was implemented in 2017, there were over 200 items which were in the 28% tax slab, but they were subsequently reduced to 18% or less. Currently, only 37 categories of items are in the 28% slab.