Home News Three-slab GST may impact indirect tax collection

Three-slab GST may impact indirect tax collection


Emboldened by improving GST collections, the government may move towards a three-slab tax structure as against the current four tax slabs (excluding tax rates on sin goods and precious metals). But amid widening GST revenue shortfall among states and subdued overall tax collections, such a move could be a drag on indirect tax collections.

On Monday, Finance Minister Arun Jaitley hinted that the “sun was setting on the 28 per cent slab”, besides hinting that a standard rate — a mid-point of 12 and 18 per cent — could be round the corner. Probably, Jaitley is taking comfort in the fact that average gross collections of CGST, SGST, IGST and Cess for FY19 (till November) at Rs 97,040 crore are better than Rs 89,885 crore in FY18.

But in reality, FY18 shouldn’t be a benchmark as GST was rolled out in the second quarter (July 2017) and with a lower tax base. Currently, 1.1 crore tax payers are registered with GSTIN (Goods and Services Tax Identification Number). A higher tax base should fetch more revenue, but the Centre has no such luck and is coughing up higher compensation to states in FY19 over the previous year.

For instance, if the Centre paid Rs 48,178 crore as compensation for nine months in FY18, this fiscal, it already forked out Rs 30,751 crore in just six months. States like Punjab, Himachal Pradesh, Uttarakhand, Jammu and Kashmir, Bihar and UT Puducherry are witnessing a huge revenue gap as against the national average, while only a handful including Andhra Pradesh, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim have revenue surplus.

Experts also feel that the government may revise the 14 per cent per annum GST revenue growth rate target for states, to allow itself some relief from higher compensation outgo to states.As if the revenue shortfall isn’t enough, indirect tax collections are likely to be affected by the recent reduction of Central excise duty on petrol and diesel in October, resulting in Rs 7,000 crore revenue loss.

Source: Indian Express