CII Requests for Prompt GST Rate Adjustment in a Meeting with the Finance Minister
CII Advocates for Prompt GST Rate Revision and Reforms in Meeting with Finance Minister
The Confederation of Indian Industry (CII) has called for an expedited process for GST rate rationalisation during a recent meeting with Finance Minister Nirmala Sitharaman. Among the key recommendations made are the inclusion of petroleum products under GST, relaxing input tax credit regulations, and simplifying audit procedures.
The GST Council is anticipated to convene in June or July to deliberate on crucial matters, including the long-awaited rate adjustments, potential slab mergers, and the future of the compensation cess. A group of ministers (GoM) led by State Finance Minister Pankaj Chaudhary is currently evaluating the compensation cess’s fate beyond March 2026.
Key Proposals on the Agenda
In its meeting prior to the GST council assembly, CII emphasized the need for a swift conclusion to the GST rate rationalisation. The industry body pushed for the complete inclusion of petroleum products within the GST framework, adjustments to input tax credit policies to alleviate working capital challenges, and smoother audit processes.
The forthcoming assembly of the GST Council, overseen by the Finance Minister, will review the GoM’s recommendations on rate rationalisation aimed at providing relief to taxpayers through potential rate cuts and a restructuring of the existing tax slabs. The GoM, chaired by Samrat Chaudhary, Deputy Chief Minister of Bihar, submitted its findings in December 2024. Proposals under consideration also include lowering the tax rate on health and life insurance from 18% to 5%, while still maintaining the input tax credit.
The Complexities of Including Petroleum Products
The proposition to integrate petroleum products into the GST framework presents a multifaceted scenario with both advantages and disadvantages. Industry advocates assert that such integration would streamline the tax system and might help reduce prices. However, state governments are apprehensive regarding the potential impact on revenue. Currently, key petroleum products such as crude oil, petrol, diesel, natural gas, and aviation turbine fuel remain outside the GST jurisdiction.
GST Slabs and Future Developments
As it stands, the GST framework consists of four primary slabs: 5%, 12%, 18%, and 28%. The Central Board of Indirect Taxes & Customs (CBIC) is currently evaluating the possibility of revising these slabs, potentially merging the 12% and 18% brackets into a single rate of 14%, 15%, or 16%, each scenario carrying different revenue implications.
Future of the Compensation Cess
The GoM on Compensation Cess, chaired by State Finance Minister Pankaj Chaudhary, is exploring the cess’s future beyond March 2026. Currently, the cess applies to luxury and harmful goods, but its revenue is primarily directed towards repaying loans secured during the pandemic, which were intended to offset state revenue losses from guaranteed GST income. The GoM is set to propose strategies for retaining cess revenue in some form and determining its allocation between the central and state governments.
