The GST Council has decided to cut tax rates on a number of goods and a few services. While the notional revenue loss has been pegged at Rs.5500 cr., the government will hope that better compliance and consumption growth can compensate for lower rates. The rate cuts are likely to fall short of the Street’s expectations, as rates on goods such as cement and some auto parts that were in the highest 28 percent slab were not reduced. Taxes on walking sticks were cut from 12 percent to 5 percent. Similarly, the rate differential in movie tickets above Rs.100 and below that was maintained. Also, taxes for televisions were lowered but only for screens up to 32inches. With elections around the corner, the government will be keen to reiterate that it’s on the side of the common man. Among the decisions of the GST Council, the rate cuts may have got all the attention, but the setting up of a 7-member group of ministers merits equal attention. GST revenues have been falling short of original estimates, especially in some states, and this GoM has been tasked with finding out why. While the process may take time, it could set the stage for some structural changes to the GST superstructure.

(Money Control)