The GST Council meeting on September 3 and 4 will discuss rate rationalisation recommendations. Ahead of that crucial meeting, various industry and retail bodies are urging the government to implement the new rates as soon as possible. This is to ensure that the festive season, which is already underway, is not impacted.The automotive sector, for one, has requested the government to implement the changes before September 22, which is the start of Navaratri.Retailers are already feeling the pressure of uncertainty. Kumar Rajagopalan, CEO of the Retailers Association of India, said, “Customers are buying what they can when it comes to low price point items, but when it comes to long lasting items like cars or large electronics, there is definitely some amount of cutbacks, because consumers are saying maybe the GST rates are going to come down. Should I really buy it today?” He added that clarity on rates is urgent as growth in retail has been muted at 4-5% over the past year.
According to capital markets and Investment Group CLSA, a goods and services tax cut could result in an annual revenue loss of approximately ₹1.5 lakh crore. The loss would be split equally between the centre and the states.
Former CBIC Chairman Najib Shah said that the Centre will need to address states’ worries over revenue loss. “There is likely to be a severe loss, at least in the immediate aftermath of these recommendations, of anything between ₹1.5 to 2 lakh crore. Now that’s a lot of money which is going to get lost, both to the Centre and to the states,” he noted.Shah added that while states may seek compensation, the timeline for implementation before September 22, the start of Navaratri, is “hugely optimistic.” He pointed out that GST Network (GSTN) would also need to be fully prepared to handle the changes.Shah, however, cautioned that while hikes in certain categories may bridge some of the gap, they will not fully replace the lost compensation revenue. He said, “The Centre will have to come out with some out of the box solutions to satisfy the states’ concerns. But once rates are announced, notification and implementation can be quite quick, typically within a week.”Abhishek Jain, Partner & National Head – Indirect Tax at KPMG in India, pointed to the upcoming end of the compensation cess. “Once the compensation cess goes away and on sin and luxury goods the rate of GST increases from 28 to 40%, that 12% increase will be an additional revenue for both the Centre and the states. That may counterbalance the revenue loss because of the rate rationalisation,” he explained.For the entire discussion, watch the accompanying videoAlso Read | GST cuts and tax relief may offset more than half of Trump’s tariff impact: Pankaj Murarka
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