New Convener of the Group of Ministers (GoM) on GST rate rationalisation

  • June 12, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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New Convener of the Group of Ministers (GoM) on GST rate rationalisation

Subject: economy

Section: Fiscal Policy

In News: Finance Ministry has started the process of deciding on new convener, as the post fell vacant after change of government in Karnataka. (CM Basavraj Bommai was holding the post of convener)

GoM

  • The 7 member GoM was set up under GST council in Sep 2021.
  • Members of the GoM are: Karnataka, Bihar, Goa, Kerala, Uttar Pradesh, Rajasthan, and West Bengal.
  • Generally through consultation the senior-most member in a GoM is named as the convenor of the panel. (member of GST council can be minister of finance or taxation or any other minister)
  • GST Council had in September 2021 decided to set up a GoM on rate rationalisation and correction of inverted duty structure. The objective was to:
    • simplify the rate structure,
    • review the GST exemption list and
    • enhance GST revenues.
  • GoM submitted an interim report in June 2022, to the GST Council proposing changes in tax rates for some goods and services to rationalise the levy. The GST report, which was accepted by the council, suggested following:
    • 5 per cent GST on ‘pre-packaged and labelled’ curd, lassi, puffed rice, and wheat flour, which are usually produced by large manufacturers,
    • correction in inverted duty for a host of items, including edible oil, coal, LED lamps, printing/drawing ink, finished leather and solar water heater.
  • Currently, the GST regime has five broad tax slabs of 0, 5, 12, 18, and 28 per cent. A cess is levied over and above the highest 28 per cent rate on luxury and demerit goods.

Rationalisation of GST rate slabs:

  • Government may consider a move to a twin-tax structure under the GST regime.
  • This is likely to help correct the inverted duty structure that leads to difficulties in claiming the net input tax credit.
    • An inverted duty structure is a situation where inputs or raw materials are taxed higher than the output or finished products for sale
  • The two rates of 5% and 18% are likely to be adopted
GST Council

  • It is headed by the Union Finance Minister and comprises state counterparts.
  • Rules mandate the Council meet at least once every three months
  • It is supposed to make recommendations to the Union and the states on important issues related to GST, like the goods and services that may be subjected or exempted from GST, model GST Laws
economy New Convener of the Group of Ministers (GoM) on GST rate rationalisation