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No possibility of GST rate hike till revenue stabilises: Sushil Modi

He said the Council had decided to consider changes in the rates once a year, and not in each and every meeting

Dilasha Seth  |  New Delhi 

Sushil Modi at FICCI Conclave
Sushil Modi at FICCI Conclave

Days after the (GST) Council refrained from hiking the tax rates, Bihar Deputy Chief Minister Sushil Kumar Modi said there was no possibility of any such move till revenue stabilised. He said the Council had decided to consider changes in the rates once a year, and not in each and every meeting.

A hike in rates, he said, would have hampered consumption amid the economic slowdown. “I want to assure you that not a single state, as well as the Union government, is ready to raise tax rates,” he said, speaking at FICCI’s 92nd annual convention. Also, there wasn’t scope to cut rates now till revenue stabilised, despite falling consumption, he said. “At a time when the economy is in a slowdown, if you cannot cut the tax rate, do not increase the rates, to boost consumption. At these times, you cut duties and tax rates, and not increase them,” he said.

The revenue augmentation panel in the Council meeting last week recommended revisiting and restructuring the rate slabs, besides correcting the inverted duty structure. The panel listed 24 items, including mobile phones, footwear, fabrics, LED light, medical equipment, utensils, agri machinery, pharma, and renewable components, which have an inverted duty structure, resulting in refunds of close to Rs 20,000 crore annually. Inverted duty structure refers to higher duties on inputs than those on the final goods and services.

On broadening and rationalising the GST rates, some of the suggestions compiled by the panel included hiking rate on precious metals from 3 per cent to 5 per cent, taxing higher segments of education and health.

Revisiting rates on certain items that went down from 28 per cent to 18 per cent was also on the list.

Compared to the pre-GST period, 99 per cent of the goods and services have less taxes levied on them post-GST, Modi said. However, he added that fake invoicing had become a major issue and the government was looking at ways to check the menace.

GST mop-up

The Council meeting on Wednesday had decided to block the input tax credit for fake invoices in certain cases and further restricted the credit for invoices not uploaded in relevant forms to 10 per cent from the current 20 per cent of the eligible credit. Four of the eight months in the current financial year have yielded less than Rs 1 trillion. After plummeting to a 19-month low in September at Rs 91,916 crore, GST collection recovered to Rs 1.03 trillion in November, posting a 6 per cent year-on-year growth rate on the back of festive demand.

Despite that collection was lower than the rate needed to meet the steep target for FY20.The officers' panel had red-flagged that the Centre may be staring at a compensation cess shortfall of at least Rs 63,200 crore this financial year, which may balloon to Rs 2 trillion by 2021-22. Here, it assumed a revenue growth of 5 per cent, while the actual growth in the April-November period is 3.7 per cent. The department of revenue had earlier this week pegged the target for GST collection at Rs 1.1 trillion a month for December-March 2019-20 with one of the months yielding Rs 1.25 trillion.

First Published: Sat, December 21 2019. 23:39 IST
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