GST glitches addressed: Sensible moves, by a sensitive council–11.11.2017

The Goods and Services Tax Council has, on the whole, done a good job, lowering rates of tax on several products, unifying the tax rate for restaurants and all those opting for the composition scheme, whether traders or manufacturers, raising the turnover limit for eligibility to enter composition rather than file detailed returns and claim input tax credit, and giving businesses more time to file their returns in the first phase of implementing the new tax, till the end of the current financial year. However, GST remains a work in progress even now, with the GST Network chief heading a committee to make further amendments on certain matters and even the rates now proposed amenable to further change, depending on how revenue collections pan out. The good thing is that the GST Council is willing to identify glitches in the tax when they stare it in the face and to fix them.

That the number of goods that are taxed at 28% has been pruned to just 50 is welcome. Whether this benefits the ceramic producers of Morbi in poll-bound Gujarat is incidental. Removing chocolate from the 28% tax category is testimony to changes in the median consumption basket.

Air-conditioners and cement staying at 28% makes little sense, however. States have not agreed to bring real estate, petroleum products or electricity under GST, leaving huge gaps in the comprehensive audit trail GST should have brought about. Restaurants have been denied input tax credit, in lieu of lowering their GST rate to 5%, except those in hotels where the room tariff is above Rs 7,500 per day, which would be eligible for input tax credit but have to collect 18% tax from customers. It is debatable if this is the right thing to do.

If a particular industry fails to pass on the benefit of removing tax cascade to consumers, should the government’s response be to remove it from the basic logic of GST or to deploy an institutional mechanism to force the industry to pass on the benefit? The Competition Commission of India is already in place as an available institution and the anti-profiteering clause of the GST law offers another.

via GST glitches addressed: Sensible moves, by a sensitive council

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