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Experts decode the GST rate hike recommendations and compensation tussle

Updated : December 10, 2019 10:28 PM IST

The goods and services tax (GST) relook remained in focus on Tuesday.  The officers' panel nominated by the GST Council will make a detailed presentation on recommendations to the GST Council later this month. According to sources, they may recommend increasing the 5 percent slab to a maximum of 8 percent and the 12 percent slab to a maximum of 15 percent.

Meanwhile, the ongoing tussle between the centre and the states may worsen further. The finance commission feels that the rate of GST compensation to states at 14 percent is unsustainable. This even as some states suggest that compensation to states may need to be extended beyond 2022 but at a lower rate. These views are likely to come up during the December 18 GST Council meet.

The parliamentary standing committee on finance noted that the government has begun a review of GST rates and slabs even as collections slow down. The panel asserted that government must resolve all issues with the tax regime and prevent misuse of various provisions to enhance collections.

Tax expert, Rohan Shah said, “We are reappraising a lot of the fundamental pillars of the GST that we brought forth. I would think that there is obviously a serious economic issue that we face in terms of the compensation to the states as also in terms of the collection of taxes which takes us in this direction.”

Pratik Jain, Leader - Indirect Tax at PwC India said, “This may not be the right time to tinker with the tax rates because of the economic condition, because there are a lot many things happening in GST at this point in time.”

“However, I am happy with one fact that now they are not talking about selectively increasing or decreasing the tax rates. They are talking about moving the slab itself from 5 percent to 8 percent. If the government really thinks that there is no other option, then I am okay with at least moving the slabs and not selectively picking it out,” he added.
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