A report of the Parliamentary Standing Committee on finance was tabled on Tuesday in the Parliament. The report suggests that the government has begun a review of Goods and Services Tax (GST), including possible resetting of GST rates and slabs.
The panel has also commented on the low GST collections saying, "the committee is constrained to observe that the GST collections have slowed down in the recent months as compared to the target."
Speaking to CNBC-TV18 about this development, Pratik Jain of PwC India said that a rate hike might not necessarily mean an increase in collections.
“The discussion has been going on for some time now. The fact is that collections are down; now the question is whether the collection will necessarily go up if you increase the tax rates, and I think that it might not be correlated. In other words, if you increase the taxes in indirect tax, there is no certainty that the collections will go up because it impacts the demand as well,” he said
Jain further elaborated that the tax rate is not the reason for subdued collections.
“There is an economic slowdown which is there at this point in time and there have been challenges in GST about tax evasion and so on and so forth. We have not been able to expand the tax base as we wanted to. So, therefore I think that going for a substantial rate increase at this point in time may not be desirable a) from an economic standpoint and b) this was not the structure of GST that we envisaged earlier, ” he explained.
Jain also batted for not changing the GST structure. “If at all they consider that the rate change has to happen, then rather than changing the rate for selective items, it is better to change the slab rates itself. So, 5 percent could become 6-7 percent at least from a structural point of view and that may not be a bad idea,” he said.
First Published: Dec 10, 2019 3:29 PM IST