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It’s been almost two and a half years since the launch of Goods and Service Tax (GST), GST council is expected to increase the base slab from 5% to 9-10% after a discussion on major restructuring measures.

ಕನ್ನಡ ವರದಿಗಾಗಿ ಇಲ್ಲಿ ಕ್ಲಿಕ್ ಮಾಡಿ.

The movement in GST would increase the tax burden on consumers but may generate additional revenue of close to Rs 1 lakh crore while eliminating the 12 per cent rate and moving 243 items in this segment to the 18 per cent band. Several items currently exempted from tax — from treatment in “expensive” private hospitals to hotel accommodation under Rs 1,000 and high-value company home leases — It may be brought within the scope of the tax referred to as sources familiar with the discussions between the Center and the States.

M S Mani, a partner at consulting firm Deloitte said that “Businesses would prefer stability in GST rates and procedures as every change made by the government requires them to recalibrate their internal processes and systems.”

A reduction in tax levels on hundreds of items since the launch of the GST in July 2017 means that the effective tax rate fell from 14.4 per cent to 11.6 per cent, with revenue affected by Rs 2 lakh crore. Compared to the revenue-neutral rate of 15.3% proposed by a committee headed by former chief economic adviser Arvind Subramanian, the hit could be as much as Rs 2.5 lakh crore.

It is been expressed that, an economic slowdown has accentuated the problem impacting tax collections of the Centre and states and creating a situation where the monthly compensation burden on the Centre is estimated to rise to around Rs 13,750 crore this year, compared to one-third of that in July-March 2017-18. An official estimate suggested that next year, the monthly compensation bill may cross Rs 20,000 crore as the Centre has to compensate states in case revenue growth is below 14%. Faced with a tough call, the Centre is expected to set out the scenario and choices before the states. It is also being argued that while prices will go up, moderate inflation in the past few years needed to be kept in mind as also that the actual increase is not likely to be large for several items. Items in the zero-tax category are not being touched. Changing the lowest slab may contribute most to revenue increase.