Budget 2025: Rationalise GST rates to boost growth
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Even as economists are looking at the Union Budget, to be presented by Finance Minister Nirmala Sitharaman in Parliament on Saturday, to revive sluggish growth, one area that needs special consideration is the GST implementation.
The GST has streamlined the process, as evidenced by the increase in tax collection. However, it is beset with many implementation issues. If these bottlenecks are removed, that will positively impact Kerala's economy, too. More specifically, taxes on tourism and the small-scale sector need to be changed.
Tourism sector
The state government has promoted many programmes to attract more tourists. Many players in the field have also invested in facilities like elephant rides, cable cars, and trekking to attract more visitors throughout the year. However, the 18 per cent GST works as a deterrent. This should be reduced to 5 per cent to give an impetus to the sector.
Construction sector
At present, two types of GST rates apply to the construction sector. The GST rate for an affordable residential unit is 1 per cent, while for others, it is 5 per cent.
Moreover, for the construction and sale of residential flats and villas, the builder is not entitled to the input tax credit (ITC) for the purchase of cement, sand, plumbing items, brick, etc.
To correct the anomalies, we can adopt two methods to calculate tax: the compounding method without availing ITC and the non-compounding method.
In the non-compounding method, the builder must avail of ITC on all his purchases of building materials, and these purchases should be from registered dealers.
Similarly, for an undivided share of land in a joint venture, the builder has to remit GST under the Reverse Charge Mechanism. The present concessional rates of tax on goods and services for taxable persons are Rs 1.5 crore and Rs 50 lakh, respectively.
The turnover should be increased from Rs 50 lakh to Rs 1 crore to encourage small contractors (those who do repair and maintenance work). This will definitely help small-scale entrepreneurs. For exports, the ‘refund’ process should be streamlined and made available at the appropriate time.
Other suggestions:
* The new Amnesty Scheme's time limit should be extended from March 31, 2025, to September 30, 2025. All notices coming under Section 74 should also be included in the scheme.
* Necessary forms should be made available in the portal. The scheme does not mention the delay in filing the return, interest, penalty, etc. So, the scope of this scheme is limited. It has to make more liberal for the initial four years.
* The ‘Sabka Viswas’ scheme should be continued for another year to remit the balance tax, interest, and penalty on the cases pending with the department. This will help the business community.
* According to the GST Council's notification, if the landowner of the rented property does not have GST registration, the entrepreneur should remit the tax through RCM, and they can avail of ITC at the rate of 18 per cent.
However, small businesses and hotels cannot avail of ITC, which would put an undue burden on them. Therefore, businesses that cannot avail of ITC should be exempted from the 18 per cent Reverse Charge Mechanism.
(The writer is a Chartered Accountant and GST expert)