GST revenue may witness ‘shortfall’ for 3-4 months after rate cut: Sushil Modi : 03-08-2018

GST Implementation Committee chairman Sushil Modi on Thursday said there may be a ‘shortfall’ in revenue collections for the next three-four months with lowering of the indirect tax rates on more items.

Modi, who is also the deputy chief minister of Bihar, said in the long-run revenue collections will increase due to improvement in tax compliance.

Speaking at an event, organised by The Institute of Chartered Accountants of India, here he said, “When you reduce the tax rates, there may be shortfall in revenue for the next 3-4 months. And sales remain comparatively lower during the monsoon season.”

In the most recent rate rationalisation, the GST Council on July 21 approved rate rationalisation for 88 items including white goods. Thanks to the recent reduction in the GST rate from 28% to 18%, washing machines, refrigerators and microwave ovens among a clutch of other goods have become cheaper by around 8%.

“In the long run, the revenue will gain because lowering the rates will lead to more compliance and people have a tendency to pay taxes when it is low. There will be better revenues as tax rates for more than 450 items were brought down,” Modi said.

According to the senior BJP leader, the new indirect tax structure, implemented from July 1, 2017, would be a “complete GST” only after petroleum products, stamp and electricity duty are included.

GST Council could think of bringing the petroleum products under the new tax regime only after the monthly revenue target of Rs1 lakh crore was achieved, he said, adding, there was “no guarantee” that the prices of petroleum products would come down if these items were brought under the GST.

“No states will like to reduce revenue as they are earning 40% of their revenue from petroleum products. Even if these products are brought under GST then states will also be allowed to levy taxes over and above the GST rates,” Modi said.

“Let the revenue stabilise. When we will achieve the Rs 1 lakh crore (monthly) collection target, then only the GST Council can think about bringing petroleum products under the new tax system. I don’t see inclusion of these products in the tax regime in near future and it will take a longer time. But ultimately, stamp duty, electricity duty and petroleum products have to come under GST,” Modi opined.

Source : Financial Express

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