GST rates to be modified once a year now: Nirmala Sitharaman

Kolkata: The Narendra Modi government is planning to reduce the GST rate rationalisation frequency to once a year, from the existing trend of every three months, to end the “uncertainty” faced by industry and the government. Union finance minister Nirmala Sitharaman announced this on Sunday after she met top industrialists in Kolkata about her Budget.

Calling upon all states to raise their concerns through their finance ministers at the GST Council, she also claimed to have laid the foundation of India becoming a $5 trillion economy by 2025 in her Budget. Rejecting West Bengal chief minister Mamata Banerjee’s complaint that her state had ben deprived in the Budget, Ms Sitharaman argued her focus was on the nation’s economic growth, and not on “which state got what”.

On the GST rate rationalisation, Ms Sitharaman said: “We have discussed it in the GST Council. We literally proposed to the GST Council to consider a situation where we would do any rate rationlisation, increase or decrease, once a year alone and not every three months. We will do it because if the rate change happens in every three months, both business and government will remain uncertain.”

She went on: “In GST when you have a certain level of rate, periodical change leads to a inversion problem like refund issues. Therefore, when suddenly one product’s rate of taxation is brought down, a whole lot of ripple effects is created. With the ripple effect, either refunds get affected or businesses cannot plan how much they have to keep aside for taxation in the whole year.”

The finance minister added: “Similarly, the government, both state and Central, is not able to make an assessment of what it will earn through GST yearly. So rate cuts or increases every three months, when the GST Council meets, are periodically bringing in a certain level of uncertainty. The businesses do not understand and they cannot (assess) how much it is going to hit them.”

“The government cannot make an assessment of how much revenue generation is going to happen in view of the constant change of rates every three months,” the finance minister said. Reaching out to the states to raise their grievances at the GST Council, Ms Sitharaman said the Centre alone cannot take a call on any issue if states don’t say anything when the businesses are located in their jurisdiction.

“The state ministers should voice the same concern in the GST Council. It’s a federal structure, in which the GST Council has healthy relations with all state ministers. They can discuss freely and take a call. It is healthier if the states come through their ministers to voice all their concerns,” she added.