Central Board of Indirect Taxes & Customs (CBIC) Chairman Sanjay Agarwal, in his ex-officio category, has pitched for three rate structures under Goods & Services Tax. While talking to businessline, he also advocated a graded approach to impose GST on crude and four petroleum products.
“As Chairman, I see the rates should move on a guiding principle to have one standard rate, one higher rate for items used by certain sections of the society and one lower rate,” Agarwal said while responding to the Budget announcement related with rate rationalisation where the final recommendations have to be given by the GST Council. In her Budget speech, Finance Minister, Nirmala Sitharaman had said: “To multiply the benefits of GST, we will strive to further simplify and rationalise the tax structure and endeavour to expand it to the remaining sectors.”
Agarwal said that GST rates were finalised on the basis of what was the rate in pre-GST era. Later, over seven years, some rates came down under GST. “The determining factor for deciding the GST rate is that all items which are subject to GST should be under the standard rate. There should be certain items concerning the societal obligation to provide, so may be food items should be on low oversight. Then there are items which are consumed mostly by affluent section of society. These should be at a higher rate,” he said.
‘Guiding principle’
Calling this is a “guiding principle”, he said that there should not be too many rates. For example, there are two rates – 12 per cent and 18 per cent – where there should be one. “We have to see individual items and see that if the items are of similar nature and similar type of consumption, then they should be subjected to one rate,” he said. As of now, there are four general rates – 5, 12, 18 and 28 per cent. Also, there are special rates of 0, 0.25, 1, 1.5 and 3 per cent.
A Group of States’ Ministers (GoM), under the convenorship of Deputy Chief Minister & Finance Minister Samrat Chaudhary, has been assigned to give suggestions for rate rationalisation. The group is expected to make a presentation before the next meeting of GST Council, following which discussion will be initiated for rate rejig.
GST on fuel
On the issue of imposing GST on petrol and diesel, Agarwal said that government can take a graded approach towards industrial-use petroleum products under GST. “In my personal opinion, crude and natural gas are more doable. Products used in transportation such as ATF, petrol and diesel are contentions items,” he said, adding that both the States and the Centre get high revenues and these have helped in times when extra revenues are needed. “Industry feedstock items look possible for consideration under GST,” he said.
Talking about comprehensive review of the customs duty rate structure, the CBIC chief said this exercise aims to encourage and give impetus to domestic players and export-oriented products, strengthening and diversification of supply chain and correction of real inversion. “We do need a separate committee to study this. We have a broad study ready. CBIC will now study real time granular data to give shape to new, revised Customs rates,” he said. The Budget has set a timeline of six months for revamp.