GST rate rationalisation challenging due to socio-economic, revenue considerations: CBIC Chairman

The ongoing exercise of rationalising Goods and Services Tax (GST) rates is proving to be a challenging task, given the multiple socio-economic and revenue factors involved, said Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Agarwal. He highlighted that while rate adjustments are aimed at simplifying the tax structure, balancing revenue needs and socio-economic compulsions remains complex.

In an interview with Moneycontrol, Agarwal stressed that the Group of Ministers (GoM) on GST rate rationalisation is carefully examining all aspects and will submit a report soon. "The GoM is examining all issues comprehensively and will submit a report. They will have to arrive at some consensus," he said.

Agarwal explained that the initial GST rates were fixed based on the principle of revenue neutrality. However, over time, socio-economic factors have necessitated a fresh review. "Earlier, the rates were fixed by keeping revenue neutrality as the principle. Now, there are many socio-economic compulsions. Accordingly, rates are determined, but revenue is also a crucial factor," he said.

He pointed out the challenges in ensuring consistency in tax rates across similar items, which often leads to classification disputes. "When we put items in those rates, it should not lead to disputes. Also, the same type of items should not fall into two different rates," Agarwal added.

According to Agarwal, while it is relatively easier to reduce tax rates, raising them is a tougher exercise. "If something is to move to a higher slab, it is difficult. Moving to a lower slab is easier, but something has to move up as well," he remarked.

The GST Council had set up the GoM, led by Bihar Deputy Chief Minister Samrat Choudhary, to review the tax structure and recommend measures to streamline it. The aim is to reduce rate anomalies and boost revenue while ensuring that socio-economic priorities are addressed. The other members incluse Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda, West Bengal Finance Minister Chandrima Bhattacharya and Kerala Finance Minister KN Balagopal.