Government is getting negative feedbacks from traders, state governments and consumers regarding the current structure of tax rate under GST. To ease them, the government may come up with such measures to help consumers and traders.
A Move that can accomplish the goal of GST
The basic idea of GST was a tax system with single tax rate on all the goods and services but considering the complexity of Indian Market, GST that was implemented had four slabs with additional cess charges.
Many economists and traders criticized this step of the government of having four tax rates resulting in complexity while filing GST returns. Now, unless the measure of reducing two or three tax rates is taken we would not be able to match the perfect idea of GST.
This step might be taken soon in order to ease the consumers and the traders. The GST implementation leads to rise in tax rates of many goods and reduction of tax rates on many. Electronic items have felt the heat as the tax rate went from 12% to 18%. The state governments have also asked the GST Council to change the rates of many items and that is why the union government is mulling to go for single or dual tax rate.
Possible Makings if this Proposal is implemented
If dual tax slab is introduced, it is possible that most of the items which fall under 5% tax slab may turn zero rated while a few items may either jump to 12% or 18% tax slab. Similarly, the advantage will be for the dealers and customers who buy commodities that fall under 28% tax slab as it will be reduced to 18%. Car dealers and buyers will cherish this case unless any additional cess is introduced to compensate revenue loss.
It would be interesting to see whether the rates of services will fall from 18% to 12% or remains the same. Although, with a single rate structure, commodities falling under 12% tax slab may get costlier if they move to 18%.
The tax revenue collected for July was around 92,000 crores that exceeded the target of 91,000 crores set by the government therefore, the signal from revenue collection and 2019 elections may force the government to soon go for dual or single tax rate structure.
Finance Minister Shri Arun Jaitley is also of the same opinion that if compliance increases and tax collections response turns stronger then he will definitely look forward to reduce the basket of 28% rate. The GST council will only consider desired revenue irrespective of the fact whether the tax rate remains multiple, dual or single.