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Informist, Monday, Dec. 2, 2024

 

NEW DELHI – The average goods and services tax rate for the financial year 2023-24 (Apr-Mar) was 11.64%, much lower than the revenue neutral rate of 15.0%-15.5% assumed at the time of introduction of the GST regime, Finance Minister Nirmala Sitharaman said on Monday. A committee headed by the then chief economic adviser Arvind Subramanian had suggested a revenue neutral rate of 15.0-15.5%.

 

"Based on current data of GST returns as available with the Goods and Service Tax Network, the average GST rate for financial year 2023-24 is 11.64%," Sitharaman said in a written reply in the Lok Sabha.

 

The GST Council started a rate rationalisation exercise as part of an attempt to improve revenues, by reassessing tax rates, pruning the exemption list, and correcting inverted duty structures. GST slabs may have to be rationalised to augment additional revenue for states, as several of them have revenue deficits despite being provided grants to eliminate such deficits, PRS Legislative Research said in a report titled 'State Of State Finances' last year. Currently, the GST structure has four rate slabs--5%,12%, 18% and 28%.

 

Over the years, the GST Council has reduced rates on several items, especially before the 2019 General Elections, which led to the average rate falling below the revenue neutral rate.

 

Sitharaman said that there is no bitterness between the Centre and the States on GST. "GST shares to states are settled on a regular basis as provided under the GST law," she added. 

 

In a separate reply to the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said that in FY24, 70-75% of the total GST collections came from 18% slab, followed by 13-15% coming from the 28% slab, 6-8% coming from the 5% slab and 5-6% coming from 12% slab.

 

At the next meeting on Dec. 21, the GST Council is likely to approve a host of GST rate rejigs which will help the government to mop-up additional revenues to the tune of INR 220 billion per year. The proposed changes aim to raise taxes on luxury and sin goods, on one hand, and provide relief on essential items, on the other, Informist reported on Oct. 19. 

 

It is necessary for revenues to improve, especially now that the compensation to states for shortfall in revenues has been discontinued. To bring states on board, at the time of introduction of GST in July 2017, the Centre had promised to protect 14% revenue growth for states for the first five years of GST.  End

 

Reported by Priyasmita Dutta

Edited by Saji George Titus

 

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