Bikky Khosla | 24 Jul, 2018
The GST Council last week announced reduction of rates on a list of
100 items, including sanitary pads, small TVs and footwear. The new
rates are to be implemented from July 27, and now with the tax rate
coming down on 15 items from 28 percent to 18 percent, the number of
products in the highest GST slab will come down drastically.
Announcing the decision, Union Finance Minister Piyush Goyal said the
move would benefit consumers, but views vary on the probable outcome
of the decision.
The Opposition took
no time to view that the decision was taken keeping in view the
upcoming Lok Sabha elections in 2019 and Assembly elections in
Madhya Pradesh, Rajasthan, Chhattisgarh and Mizoram later this year.
On the other hand, from an economic point of view, some experts point
out that the cut would result in a revenue loss that is as high as 1
percent of the tax budgeted. This amount may reach Rs 60 billion,
according to some estimates. For them, this can be bad news at a time
when the budget deficit needs to be kept under control.
In contrast, some others view that private consumption will get a big
boost from the rate cut. For the last few years, private consumption
has been a strong support for the economy, and it is expected that
now the lower tax rates will help keep private consumption strong.
Festivals like Diwali and Christmas are ahead, considering which the
rate cut on consumer durable products is expected to increase demand
in a big way, offsetting the effects of revenue loss due to the move.
While debates on the aforesaid issue abound, it is widely agreed that
the GST councilâs another major decision -- to allow quarterly
return filing for businesses with turnover of up to Rs 5 crore --
will prove beneficial. It will facilitate ease of doing business and
particularly ease miseries of MSMEs. Also, increased compliance is
expected. In his announcement, the Finance Minister said that a
special meeting of the GST Council would be held on August 4 to
further focus on MSMEs, and we
will all eagerly await
it.
I invite your opinions.
