We are sorry! It seems that the curse of 2020 will only be getting worse.
In what appears to be the most unpalatable political move ever – especially during the time when we are just getting our bearings during pandemic – officials are trying to push something inane and ridiculous. “Rework the GST slabs and Increase the levies” is the twisted battle-cry in the mouth of these officials.
What’s the issue?
16th June 2020 saw many states blocking the GST council from implementing increase in GST on the following products:
- Renewable energy.
- Pharmaceutical products
The increase was part of the proposal which seeks to rework the Inverted Duty Structure:
Inverted Duty Structure is where less tax is levied on finished product as compared to its raw materials and manufacturing process.
Restructuring the inverted structure duty is the tip of the iceberg
Restructuring the inverted structure duty is just ONE of the many new decisions that GST officials are trying to push. The whole proposal consists of the following points:
- Protection of collection: The officials proposal state that they should also get compensation to protect the growth of their tax collection.
- Rationalization of collection: Officials see the current transformative time as an opportunity to push for rationalization of taxes, in which they are demanding decreasing the compensation of companies that are able to generate higher revenues.
- Increasing the GST rates across slabs: The officials are proposing to increase levy of 5% slab to 7-8 percent and moving items within the 12% slab to 18% bracket.
Justification for the proposal to increase GST
The points above aren’t without reasons, as the GST officials gave the following justification in the proposal to increase the levies.
- People can endure it: Officials firmly believe that the customers can endure the increased taxes. By giving a counter-example that people are already paying additional VAT on fuel prices, the GST officials told that a 1 or 2 percent increase shouldn’t be an issue.
- Increased revenue: The increased levy is another bid to increase revenue – as per the justification from GST officials. They state that by restructuring levies across all slabs and domains, they can generate additional revenue of INR 1 Lakh Crore.
The states have vehemently rejected the move to increase GST levies. The faced with the same proposal in the winter session last year and rejected that too. Being rejected twice and still coming strong, it seems that the officials are pushing hard to increase the GST levies. However, until more studies are done, the proposal is still stuck in limbo.
Our two cents
We have just started to unlock India’s economic activities and many industries are still to stabilize. In light of such situation, pushing for such decision is not only unethical but also goes against the socialist governance that India stands upon. Furthermore, increase in taxes will compromise the working capital of recovering enterprises – making all the government efforts to revive industries useless.
You should remain prepared
That being said, considering the hard-push GST officials are giving to increase levies, you should be prepared. Consult with your nearest GST expert to see how to make the best of the impending GST changes.