High Inflation May Take a Toll on GST Rates Rationalisation

Seep Gupta
Seep Gupta at June 01, 2022

The Central and States can postpone their decision of delaying the re-arrangement of GST rates because of the inflation. Inflation can affect the stability of the market and can eventually result in the increased prices of several goods. This can also result in the levying of higher Goods and Service Taxes on many items.

A group of state finance ministers has been constituted to look into the issue. The group is yet to announce their final decision and support the move. However, there is still plenty of time in the next GST council meeting next month.

However, the rearrangement of GST rates may see the increased GST rates on several items. Because of this only, the Central and the State government have decided to postpone this decision until the prices stabilise.

According to the senior government official, it is difficult to rationalise the rates as the economy is strenuous. This same issue arose in the year 2019 as well. At that time the decision of rationalisation and reworking was postponed for 2 years because of the economic slowdown and the impact of covid 19 pandemic. The ministerial panel was set up after a meeting in Lucknow last September.

Several experts have argued that the rejig of GST rates is necessary for classification-related issues. It is also crucial to improve the revenue-neutral rate which is 11.5% right now. In 2017, it was 15%. The government has already reduced the taxes on several products such as petrol, diesel, edible oil, plastic and steel. It is done to slow down the pace of inflation.

According to governmental sources, the finance ministry is also working with the cabinet secretary and other agencies to boost the supply of cement to increase production in South India. Currently, the production in South India is at an idle position.

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