Ahead of the crucial meeting of the GST Council on December 18, there have been speculations regarding the increase in GST rates as well as an increase in slabs. The GST council meeting comes at a time when revenue collections have been lower than expected and GST compensation is pending to states.
It was earlier reported that as opposed to the current GST slabs of 5%, 12%, 18%, and 28%, the rates could be increased and slabs reduced to three – 8%, 18%, and 28%. The talk of rates being raised came as a way to make up for the fall in revenues that has even hampered giving compensation to states for loss of revenue from implementation of the indirect tax regime. States had surrendered powers to collect taxes on goods and services after local levies got subsumed into the Goods and Services Tax (GST) from July 1, 2017. They were guaranteed through legislation that they will be compensated for any revenue loss in the first five years of GST implementation.
The government may also bring certain healthcare services under the GST net, as it looks to give a leg up to revenue mobilisation that has been hit hard in the ongoing economic slowdown.
Ahead of the meeting, the Finance Ministry reportedly had deliberations with state governments on measures to boost GST revenue, and according to IANS sources, is likely to recommend bringing premium healthcare services under the GST net with rates of either 12% or 18%. These could include high value implants and medicines given to patients who are taking premium services from a healthcare service provider (hospitals, nursing homes). The taxable items may also include the use of premium room, and food and beverage services by patients.
All healthcare services by a clinical establishment or authorised medical practitioner by way of diagnosis or treatment or care for illness, injury, deformity, abnormality or pregnancy are currently exempt from GST. However, hair transplant or cosmetic or plastic surgery does not get exemption and is taxed. Similarly, while medicines attract four different GST rates of nil, 5%, 12% and 18%, drugs used during hospitalisation are not taxed.
Sources told Hindustan Times that the rate on cereals which are branded, pizza, travel on both air-conditioned trains as well as flights, branded clothing, etc, could be increased.
“Most of the above-mentioned items are not consumed by the common man, hence, tax rates of either 5% or 12% on these items are not justified. Some stakeholders [state governments] have proposed raising tax rates on these items to either 8% or 18% to augment GST revenue,” the source told the daily.
According to the Business Standard, GST rates could also be hiked on mobile phones and fabric to rejig the inverted tax structure – where the rate of tax on inputs purchased is more than the rate on any sale made my business.
However, the India Cellular and Electronics Association of India (ICEA) has sought a GST rate of 5% from the existing 12% for entry level mobile handsets costing up to Rs 1,200. Entry level mobile handsets which are also popularly known as "feature phones with push button capability" still occupy approximately 50% of the total domestic market demand in India by volume translated to 120-150 million units in 2018-19, said the industry body which represents mobile handset brands like Lava, Xiaomi, Oppo and Vivo, among others.
This comes on the back of the Central GST collection falling short of nearly 40% of the Budget Estimate between April-November period of 2019-20.
In response to the buzz surrounding the increase in slabs, Finance Minister Nirmala Sitharaman had said: "The buzz is everywhere other than my office. I don't know where this is coming from. I have not been to GST Council yet... We have not had any conversation yet. But it's good to see all this churning outside, it helps to clarify our thought processes.”
With PTI and IANS inputs