Why GST restructuring is the need of the hour
GST regime, having recently celebrated its sixth anniversary, stands as a remarkable achievement in the Indian tax landscape. Over this time, it has made substantial contributions to GoI’s financial coffers.
To provide a snapshot, the gross collection for FY2023 reached an impressive Rs 18.10 lakh crore, with an average monthly collection of Rs 1.51 lakh crore for the year.
This fiscal year’s gross revenues marked a 22% increase over the previous year. This remarkable progress was highlighted by the World Bank in its India Development Update Spring 2023.
Nonetheless, it’s imperative to acknowledge the World Bank’s update in 2018, which drew attention to the global landscape of GST systems vis-à-vis India.
Among 115 countries implementing GST, 40 utilise a single tax rate, and 28 others employ a dual-rate structure.
India is one of the few countries to have opted for a more intricate structure, featuring four or more tax slabs. GST slabs in India are 0%, 5%, 12%, 18% and 28%.
The complexity escalates as cess is applied to certain luxury and ‘sin’ products, such as cars. Furthermore, cess rates vary based on factors like the vehicle’s length and fuel type, be it petrol or diesel.
A recent Authority for Advance Rulings (AAR) ruling in the case of Sirimiri Nutrition Food Products exemplifies the complexities arising from such a multifaceted system.
AAR held that several of its products, including dry fruit and spirulina chikki, will be categorised under Chapter 17, which covers ‘sugar confectionery not containing cocoa’ and will attract GST at 5%. However, ‘chocolate-peanut chikki’, which contains cocoa powder, will fall under Chapter 18, which covers chocolate and other cocoa-containing food preparations, subjecting it to a
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