: ‘Rates tweaked to make up for inefficiencies in value chain’ #finance #StockMarketNEWS #Business Press Trust of India Chandigarh Finance Minister Nirmala Sitharaman on Wednesday said any

Posted in: #finance #StockMarketNEWS #Business

‘Rates tweaked to make up for inefficiencies in value chain’ #finance #StockMarketNEWS #Business
Press Trust of India

Chandigarh

Finance Minister Nirmala Sitharaman on Wednesday said any increase in GST rates under the rate rationalisation exercise is intended to make up for the ‘inefficiencies’ in the value chain.

Stating that all states are aware of the potential impact of rate rationalisation on inflation, Sitharaman said any increase in tax rates will also make up for the tax burden, which is being borne by some other activities in that value chain.

“Technology may correct anomalies for inefficiencies and therefore may have a possible impact on revenue collection. But the revenue-neutral rate of the RBI study has been breached to the disadvantage of the system… That calls for a correction…,�? Sitharaman told reporters after the 47th Council meeting here.

As per an RBI study, the weighted average tax rate under the Goods and Services Tax (GST) has come down to 11. 6%, from 14. 4% at the time of the launch.

The revenue-neutral rate under GST should be about 15. 5%, as per the Subramanian Committee report, which was submitted before the GST launch.

Sitharaman said huge refunds are being given out due to duty inversion in certain cases and that needs to be corrected.

“As a result of which again you are sitting over potential tax yielding points, which have been left out. That’s not the efficiency of the system. So, rate rationalisation, if it results in an increase, is also making up forThe kind of inefficiencies, which have appeared now or the collateral which is being borne by some other activities in that value chain,�? she said.

So, rate rationalisation is something the Group of ministers (GoM) is looking at from this point of view also, Sitharaman said.

Inefficiencies in the taxation system creep in when inputs and final products are taxed at varying rates, leading to either tax evasion or business entities not being able to fully utilise the input tax credit fully.

The GST Council, chaired by Union Finance Minister and comprising state finance ministers, in the 47th meeting here approved the interim report of the GoM on rate rationalisation, headed by Karnataka Chief Minister Basavaraj Bommai.

The council also gave a 3-month extension to the panel for submitting a full report on rate rationalisation and potential tax slab merger under the GST.

Asked about the potential impact of rate increases on inflation, Sitharaman said inflation is not any one particular state’s concern.

“All ministers (in Council) are aware. They are all looking at the system keeping that in mind. So, decisions taken by the council are not as though are being taken in isolation.