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12/12/2019 04:57pm

In order to boost revenue shortfall, govt may hike GST rates on various items

image In order to boost revenue shortfall, govt may hike GST rates on various items

New Delhi, Dec 12 (KNN) Mobile phones and fabric might get costlier as in order to boost revenue collection, the goods and services tax (GST) on these items may be hiked by the GST Council next week.

According to various media reports, the structure of higher tax rates on inputs than on final products is resulting in a huge input tax credit outgo. The items which have seen an inverted duty structure include fabric bags, shoes, tractors etc.

The GST rate on phone parts and batteries is 18 per cent whereas on the final product i.e. mobile phones, the same is 12 per cent, triggering an inverted tax structure which leads to unutilized input tax credit and hence issuance of refunds by the government.

Reportedly, a single manufacturer of mobile phone, claimed a refund of close to Rs 4,100 crore last year, resulting in huge refunds outgo, therefore, forcing government to rectify the GST rate.

A registered taxpayer can claim refund of unclaimed input tax credit on account of higher tax on input and lower tax on output.

On the other hand, fabric has a GST rate of 5 per cent, whereas different types of yarns are taxed at 12 per cent. The GST rate on fabric will likely be hiked to 12 per cent from 5 per cent to correct the inverted tax structure, if all state finance ministers agree.

Shoes and Tractor too haven't remained untouched and those priced under Rs 1,000 are taxed at 5 per cent, while the rate of leather is 12 per cent and tractor parts are taxed at 28 per cent, and tractor at 12 per cent.

To meet GST shortfall of states, the Centre has sought suggestions for revenue augmentation including areas where inverted tax structure could be corrected and taken up by the Council.

Notably, on December 4th, Finance Minister of a few states met Union Finance Minister Nirmala Sitharaman to discuss Goods and Services (GST) compensation.

According to government data, the Central GST collection fell short of the Budget Estimate by nearly 40 per cent during the April-November period of 2019-20.

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