GST Council brought down hopes on rationalization of tax slabs. It instead focused on the issue of inverted duty structure. The 15th Finance Commission has recommended a three-slab structure for GST. The government has been wanting to merge a 12 percent and 18 percent GST slab to a mid-way slab of around 15 percent for a long but has been waiting for revenue to stabilize. A spokesperson of the council stated,” There will be no slab overhaul in the upcoming meeting as the government is still waiting for the revenue to stabilize, especially after the disruptions caused by the pandemic.”
The monthly GST collections bounced back from COVID lows in January. GST collection touched an all-time high of Rs 1,20,000 crore, almost four times of COVID low of about Rs 35,000 crore witnessed in the month of May last year.
Inverted Duty structure
The Ministry of Finance planned to address the inverted duty structure under GST. Inverted duty structure is a situation when GST paid on inputs is more than the GST paid on the outward supplies. Inversion has affected the fabric industry capsizing their capitals. Working capital crunch on account of inverted duty is seen hurting the small and medium organizations.
TPT Policy advocacy and Recommendations
- The government should relieve the dealers of Rule 36(4) and section 16 (4)of GST. The government either receives taxes or interests from the seller so why should it deprive the buyers of input credit. If GST is an improvisation of VAT; why is there inclusion of the flaw from the VAT system? How is GST different from VAT?
- Owing to the outbreak, the dealers are unable to avail benefits of the GST amnesty scheme. If the government wants the Indian Trade and Industry to sprout, it will have to entitle dealers eligible for this scheme and eliminate Section 16(4). Moreover, with the declined trade, the government should reschedule the due date of GSTR-4. Also, rationalization of the GST late fee should be considered during this period of global economic depression.