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Informist, Tuesday, May 27, 2025

 

NEW DELHI – Confederation of Indian Industry representatives batted to expedite the goods and services tax rate rationalisation exercise at their meeting with Finance Minister Nirmala Sitharaman Tuesday. At the late-afternoon meeting lasting more than an hour, the industry body said rate rationalisation will bring greater clarity to the indirect tax regime, people present at the meeting told reporters.

 

Sitharaman is likely to hold the next GST Council meeting in June, at which the long-pending issue of rate rationalisation and simplification of the tax structure may come up for discussion. The council, which has the mandate to meet every three months, last met in December in Jaisalmer, Rajasthan.

 

Sitharaman is also expected to hold more meetings with industry bodies, including the Federation of Indian Chambers of Commerce and Industry, to take their inputs on GST reforms ahead of the next GST Council meeting, a senior government official said.

 

Rate rationalisation was taken up at the December meeting of the GST Council, but no decision was taken as the states were of the view that finer details need to be worked out before announcing rate changes. "Until the rates are decided, it is best to avoid speculation," Sitharaman had said after the council meeting.

 

Bihar's Deputy Chief Minister Samrat Choudhury heads the six-member Group of Ministers that has been given the task of making recommendations to trim the list of items exempt from GST, reassessing tax rates, and correcting inverted duty structures. As part of its recommendations, the panel had proposed rate tweaks on 148 items that could help the government raise an additional INR 220 billion per annum. The proposed changes aim to raise taxes on luxury and sin goods and offer relief on essential items.

 

FUEL UNDER GST

Another key pitch by the CII was to bring petroleum products under GST. Petrol, diesel, natural gas, and aviation turbine fuel are not yet taxed under GST but are subject to value added tax, central excise duty, and central sales tax. Fuel prices vary from state to state depending on the VAT levied by state governments. So far, the GST Council has refrained from having any meaningful discussion on bringing petroleum products under GST as it will impact the revenues of states.

 

Several top government officials, including Minister of Petroleum and Natural Gas Hardeep Singh Puri, have strongly advocated bringing petroleum products within the ambit of GST. When Finance Minister Nirmala Sitharaman was asked in February about plans to bring these items under GST, she put the ball in the states' court. "We have already made provisions in our GST law for whenever petrol and diesel, at whatever GST rate, is to be brought under GST," she told reporters in Mumbai on Feb. 17. "States will have to take a decision on it."

 

But state governments have been cold to the idea. The GST Council, at its meeting in December, had discussed bringing aviation turbine fuel under GST, but the states shot the idea down because of concerns about their revenue. As per data from the Petroleum Planning & Analysis Cell under the petroleum ministry, state governments collected INR 2.93 trillion in FY24 from sales tax and VAT on fuel, while the Centre collected INR 2.74 trillion. Separately, the Union Budget for FY26 has projected the Centre's collection from excise duties to be INR 3.17 trillion.

 

OTHER PITCHES

The CII's other requests to the finance minister included relaxation in input tax credit implementation to ease issues relating to working capital. When businesses successfully claim credit for taxes paid on inputs, the cash outflows designated for tax payments are reduced. This in turn results in a shorter working capital cycle and a better cash conversion cycle, thereby enhancing liquidity. 

 

There have been widespread concerns among businesses about mounting credit accumulation and liquidity constraints.

 

The CII's previous pitch to Sitharaman was to streamline the audit process--an automated nightmare for businesses. Since September 2023, state and central GST authorities have issued several notices to some of the country's biggest public and private sector companies, including Life Insurance Corp. of India, State Bank of India, Maruti Suzuki India, ICICI Bank, Hindustan Unilever, UltraTech Cement, and Bharti Airtel. The orders were for the assessment year 2018-19 (Apr-Mar) and the following years.

 

GST authorities have been issuing system-generated tax notices, flagging cases where there are discrepancies in details filed by companies in their GSTR form 1 and form 3B. Some of these notices involve large sums, especially for insurance companies. Though the volume of these notices has declined since the peak in January 2024, they continue to be a pain point for businesses.  End

 

Reported by Priyasmita Dutta and Sagar Sen

Edited by Rajeev Pai

 

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