No further GST rate cuts as revenue concerns grow

According to the target set by the Union government, the Centre and the states combined should collect Rs 91,000 crore every month.

Rate cuts in Goods and Services Tax (GST) for consumer durables in the 28 percent slab looks very unlikely in days to come, as revenue concerns surfaced.

The GST council is scheduled to meet in January but further pruning of 28 percent tax slab looks very much unlikely, going by the declining trend of GST collection in the last two months, reported Business Standard.

In the last GST Council meeting in Guwahati, Assam, the council brought down GST rate of 177 products from 28 percent slab to the 18 percent slab. After the pruning the 28 percent slab, it has been reduced to 52 items from 227. This will cost the government an estimated Rs 20,000 crore.

“The meeting in January is unlikely to look at reducing rates. A decision will be taken after the Union Budget is presented in February. The revenue position will become clear after that,” a senior official in the Council told Business Standard. “The focus was to meet the revenue collection target,” he added.

According to the target set on the basis of the Budget Estimates of the Union government, the Centre and the states combined should collect Rs 91,000 crore every month.

However, GST collection slipped and hit a low of Rs 83,346 crore in October since the new tax regime rolled out on July 1, primarily because businesses used input credits to offset their liability.

Further slowdown in GST collection is expected, as an impact of lowering tax rates from 28 percent to 18 percent last month. The subdued collection could further affect the already worsening fiscal position of the Centre and states.

The central government paid states Rs 13,695 crore for the revenue lost in September and October, which was Rs 10,806 in July and August.

“With almost three months to go for the fiscal year, the focus is on improving revenue collections,” the official said.

Last week, while speaking in Rajya Sabha Arun Jaitley said, the government favours including petroleum products under the GST ambit.

“Revenue collections have been erratic and are yet to settle down in view of changes in rates and transitional provisions. The government may take some more time to analyse the impact of the changes before it embarks on further streamlining the GST rate structure,” Bipin Sapra of EY India told the business daily.