fin-secy-tuhin-kanta-pandey-calls-for-gst-rationalisation

The call for a rationalisation of the Goods and Services Tax (GST) rates has become more pronounced, as Finance Secretary Tuhin Kanta Pandey emphasised the need for a review of the existing structure.

 

Speaking at a FICCI post-budget meeting, Pandey highlighted that enough experience has been gained since the GST was implemented in 2017. He acknowledged that the time has come to refine the tax system to make it more efficient and manageable.

 

Pandey pointed out that while the GST has brought transparency to the tax landscape, it is essential to make adjustments to its rates. He noted that these changes will require extensive consultation with state governments to ensure a consensus on the best way forward.

 

The GST Council, which includes the Finance Minister and state counterparts, has already formed a group of ministers (GoM) to examine potential changes in the GST rates and slabs.

 

The Council had hoped that the GoM would submit its report on rate rationalisation during the last meeting in December 2024, but the report is still pending.

 

The existing GST framework follows a four-tier tax structure with rates at 5 pc, 12 pc, 18 pc, and 28 pc. Under this structure, luxury items and goods that are deemed harmful or demerit goods are taxed at the highest rate of 28 pc, while essential goods, such as packed food, are taxed at the lowest rate of 5 pc.

 

Despite the initial success of GST in simplifying and unifying the tax structure, there have been growing concerns regarding its complexity and the need for streamlining.

 

Pandey reinforced the idea that rationalisation is crucial to ensuring that the tax system is not only effective but also conducive to the country's economic growth. While he acknowledged that work on this issue is ongoing, he expressed hope that rate rationalisation would eventually be carried out.

 

The Finance Secretary further clarified that the exact nature of the rate changes will be decided after a detailed examination by the GoM. This step, he said, would allow the government to make informed decisions based on careful deliberation and consultation.

 

The Finance Secretary also mentioned that the consultation process with states is an essential part of this exercise, as it would ensure that all stakeholders are on board with the proposed changes.

 

He stressed that the goal is to arrive at a consensus on which rates should be adjusted and to determine the optimal tax structure that would benefit both consumers and businesses.