Rejig of GST rates on agenda

The Narendra Modi-government is working on a major overhaul of the goods and services tax (GST) amid growing discontent among the traders, small businesses and middle-class consumers over the rates and glitches.

By Jayanta Roy Chowdhury
  • Published 18.10.17
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New Delhi: The Narendra Modi-government is working on a major overhaul of the goods and services tax (GST) amid growing discontent among the traders, small businesses and middle-class consumers over the rates and glitches.

North Block officials said they had been asked to work on key sectors such as textiles, handicraft, handloom, leather, ayurvedic products and electronic components. Restaurants and sweetmeat producers as well as small suppliers to large businesses will also be looked into. These sectors are grappling with a confusing array of rates and rules.

Sumit Dutt Majumder, the former chairman of the CBEC, said, "We can expect a good number of items, other than demerit goods, currently in the 28 per cent slab being brought down to 18 per cent. There may be some more relief for small businesses."

The Confederation of All India Traders, a body linked to the ruling BJP party, has reported around 30-40 per cent less business than usual during the Diwali week. Besides, there has been a raft of representations from traders and small businesses, including the textile hub of Surat in poll-bound Gujarat, forcing the government to have a rethink.

The GST Council is expected to meet on November 9 and likely to approve the new rates.

"The anger among textile traders in Surat as well as small traders all over the country is evident from their representations which among other things talk about job losses and closure of thousands of looms, leading to a crisis in textile trade," said commerce ministry officials.

The commerce ministry has held consultations with the finance ministry on the issue, the officials added.

The inability of large manufacturers to claim input GST on spares and services provided by small suppliers, who are either unregistered or are registered under the composite scheme, has meant that these suppliers have been left out, leading to tens of thousands of small units employing 4-5 workers shutting shop or cutting down on work.

"In the textile sector, this has meant loss of 50,000 jobs in western India," said Manmeet Singh Kohli, a leading garment buyer.

There is also a lot of confusion over GST rates for handloom and handicraft products. Earlier, the VAT rate on most handicrafts stood at 5.5 per cent with many of them tax-exempt. Under GST, they have been placed under different slabs. For instance, the GST on sandalwood artefacts has increased to 12 per cent and on rosewood products to 28 per cent.