Industry welcomes gst rate cut plan but flags concerns on Inverted Duty and Refunds – CNBC tv18

The group of ministers (GOM) on rate rationalization have recommended a simplified GST structure of 5%, 18%and 40%, setting the stage for discussion in the upcoming GST Council Meeting. While states are assessing the impact of potential Revenue Losses, Industry and Tax Experts are weighing in on what the reforms in the reforms group mean for businesses and consumers.

The reforms, pitched as part of the government’s “GST 2.0” Initiative, AIM to Reduce Complexity, Lower Disputes, and Drive Consumption by Rationalising Rates. At the same time, challenges Around Revenue Neutrality, Inverted Duty Structures, and Examptions are drawing attentions.

Industry Reactions

Abhishek Jain, Indirect Tax Head & Partner, KPMG, said the biggest Gain would be for consumers, but noted that input tax misminors remat

“The Reduction in GST Rates is a welcome movement Long-Term Cost Implications in Cases of Inverted Duty Structures, Where Procurements, Specifically Input Services, Are Taxed Higher Than Final Supplies. Mechanisms under inverted duty structure, businesses

Pratik Jain, Partner, Price Waterhouse & Co LLP, Said the Changes Block Simplife Operations and Reduce Litigation.

“Gom’s recommendations, while in line with expectations, are significant. GST collections come from the 18% Slab (which is not proposed to be changed in general) The Revenue Impact of GSTS Cuts May Be Limited, Particularly Becularly Becure Reduced Price will also Spur The Demand. With which things are moving, Industry Needs to Quickly Gear Up and Assess the Impact as the Timeline for Transition Plan is Really Steep. “

Mahesh Jaising, Partner & Leader, Indirect Tax, DELOITTE India, Said the Reform Represents a Pivotal Moment but requires Parallel Clarity on Structural Issues.

“Moving Ahead with Honourable Prime Minister’s Announcement on Next Generation of Reforms Under GST, The GOM’s Acceptance of the two-Rate GST Structure-5% and 18%, with a targeted 40% rate for sin Items-Marks a Pivotal Step Toward a Simpler Growth-Oriented Tax Regime. Benefits. INSURANCE (Life and Health), which has been the talk of the town, is also expected to go the exemption route, which would be welcome. Results in Credit Blockages which could IMPACT COST. “

Manoj Mishra, Partner & Tax Controversy Management Leader, Grant Thornton Bharat LLP, Said the Reform Balances Ambition and Pragmatism.

“The GOM’s Endersment of the Center’s Proposal for a Two-Slab GST Structure Marks a Significant Step in the Reform Process. Build Consensus Among States and Shape the Roadmap for GST 2.0. The proposed shift – most items from the 12% Slab to 5% and from 28% to 18% to 18% – Offers Tangible Relief For The government’s broader goals of growth and financial inclusion. Recommendations strike a balance between pragmatism and ambition in defining the next phase of gst reform. “

Balancing Simplification with State Revenues

The current GST regime has five Principal Slabs – 0%, 5%, 12%, 18%and 28%, Along with a Compensation Cess on Luxury and Sin Goods. The proposed shift to a three-with structure is aimed at reduction complexity and classification disputes that have often leed to litigation and compliance burdens for businesses.

However, for states, Concerns Remain about Revenue Collections. Since more than 70% of GST Revenues Come from the 18% Slab, Keeping This Rate IS Expected to Cushion Losses. But moving items from 12% to 5% and from 28% to 18% could reduce reviews unless higher demand offsets the shortfall.

With the GST compensation cess set to expire, states are pressing the center to quantify the potential loss and propose a mechanism for recovery.

The road ahead

The GST council is expected to deliberate on the gom’s recommendations in its upcoming meeting. While the broad direction of reform has found acceptance Among Policymakers and Businesses, The Fine Print – Transition Timelines, Treatment of Inverted Duty Structure, and Clarity on Examption Insurance – Will determine how smoothly India can move into the next phase of gst reform.

Experts Agree that Rationalization is a step forward, but ensuring simplification for businesses, reliable for consumers, and fiscal stability for states will be key to its success.