Bharatmala Pariyojana

Among the many items on the Council's agenda, the extension of the GST compensation cess to states could turn out to be a contentious issue if the government refuses to accede to the request, given its vociferous demand from several opposition-rules states.

According to a Ministry of Finance statement, a section of the media has reported that feedback has been sought from states regarding a suggestion for raising Good and Services Tax (GST) rates on as many as 143 items. Some reports have even carried the number and description of the items, the statement said, adding that the GST Council, in its 45th meeting, had formed a Group of Ministers (GoM) to look into the rationalisation of rates and its deliberations are ongoing.

At present, GST on health insurance services is levied at a standard rate of 18%. "Health insurance, like majority of other taxable supplies, is standard rated at 18%. In pre-GST regime also, health insurance was standard rated," Sitharaman told the Lok Sabha in a written reply. "A significant relief in GST has been provided by way of exemption to above stated insurance schemes catering to economically weaker sections of the society and differently abled."

While major policy decisions in Goods and Service tax take place only through GST council, Union Budget 2022-23 has provided the much-needed changes in the statute, said Smita Singh, Partner, Indirect Taxes, Customs and Trade Laws, S&A Law Offices.

The GST council justified the new 5% tax on online food aggregators, arguing that such a move will reduce instances of tax invasion by restaurants. The council meeting notification read that “services by cloud kitchens/central kitchens are covered under ‘restaurant service… under section 9(5) of the CGST Act, 2017’,” will attract this tax rate increase minus the input tax credit.

As per the industry body, the current rates are not in-sync with demand creation and employment generation in the country. Accordingly, the industry body said that items in category of 12 per cent rate should be reduced to 10 per cent and items in the category of 18 per cent rate should be reduced to 15 per cent.

CAIT National President B.C. Bhartia and Secretary General Praveen Khandelwal said that in the cotton textile industry there was no inverted tax structure, then why fabric and other cotton textile goods were brought under the 12 per cent bracket. Even in the man-made textile industry, at the stage of manufacturing garments, sarees and all types of made ups, there was no inverted tax issue. Without having any understanding of the stages of the textile industry such a harsh decision will be a regressive step.

The GST regime with five major different rates and few more for certain special products had created more confusion for taxpayers than bringing about simplicity. This confusion often results in litigation that affects both the authorities and well as taxpayers. In order to remove some of confusion created by differential tax rates and it applications, the Revenue Department has issued a circular directed at all the operative officials giving clarifications

Government officials said the current revenue position, where both direct and indirect tax kitty of the government had seen a sharp rise, will prevent it from additional borrowing even if it meets full GST compensation shortfall for states during FY22. The centre has pegged its gross borrowing target for FY22 at Rs 12.5 lakh crore in the Union Budget 2021-22, presented by Finance Minister Nirmala Sitharaman

Sources working on the GST rate rational said that a three rate tax structure may become a reality early next fiscal after the views of a group of ministers (GoM) set for purpose is presented before the GST Council. The idea is, sources said, to move away from the present broad five rate structure of zero, 5, 12, 18 and 28 per cent to just three of 5, 18 and 28 per cent.