The six-member Group of Ministers (GoM), chaired by Bihar Deputy Chief Minister Samrat Choudhary, will meet in Goa on Tuesday and Wednesday to discuss tax rates on over 100 products, including fertilisers, handlooms and textiles, sources said.
The panel’s proposals will serve as the basis for a report to be presented at the 55th Goods and Services Tax (GST) Council meeting in November. Discussions on real estate will also include a compensation scheme that could have a substantial impact on the sector. “The meeting is expected to discuss the implications of rate rationalisation on 90-100 items, including real estate and rate assessments, which are key topics for discussion,” said a source directly familiar with the matter.
The panel comprises Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh Khimsar and Kerala Finance Minister KN Balagopal.
Currently, the GST consists of four tiers, with brackets of 5 percent, 12 percent, 18 percent and 28 percent.
Essential items are exempt or taxed at the lowest rate, while luxury and low-value goods are taxed at the highest rate.
Luxury and luxury goods are subject to an additional levy on top of the highest rate of 28 percent.
“Rationalisation of GST rates may not be an easy task for the GoM committee as socio-economic factors will play a crucial role. While adjustments to specific product rates are possible, major reforms — such as merging the 12 per cent and 18 per cent rates or the 12 per cent and 5 per cent rates — may take time,” said Harpreet Singh, partner, Deloitte India. “Changing the list of exempted essential daily consumption items may also prove challenging as it may result in blocked input tax credits,” Singh added.
Although there has been talk of merging the 12 and 18 percent tax brackets, no proposals have been made yet.
Currently, the average GST rate is around 12.2 percent. This is lower than the revenue neutral rate of 15.3 percent. This makes it necessary to start discussions on rationalizing the GST rate.
According to industry sources, the panel will prioritize simplifying tax rates for the real estate sector, which has long sought greater clarity on VAT rates for construction materials and services.
At its August meeting, the ministerial panel largely agreed to retain the existing four-bracket tax structure. However, they requested the Council-appointed Adjustment Panel to analyse the revenue implications of certain items and collect the necessary data.
At work
> GoM can discuss compensation scheme and tariff simplification for real estate sector
> Adjustments to specific product rates possible, experts say
> Merging tax brackets can take time
> Currently, the average GST rate is around 12.2%, lower than the revenue neutral rate of 15.3%
First publication: Sep 24, 2024 | 01:15 AM IST