GST glitches only to be expected

The GST Council has done well to revise rates on 19 services that include job work rate on textiles and also clear rules for e-way bill to remove border checkposts. Confusion over tax rates on goods was not unexpected, given that there are over 50,000 products that have come under the new levy. But ambiguity leads to classification disputes and provides the scope for buying favourable administrative discretion. That’s wholly avoidable. The remedy is to have a clutter-free GST. Goods and services have been classified as per the harmonised system of nomenclature, a globally standardised system of names and numbers.

This is welcome as identification of goods becomes easy through specific HSN codes, and also enables exporters to claim refunds on the tax paid on inputs used to make the final product. It would raise business efficiency if all products with the same four-digit HSN code were to have the same rate of GST.

Kota stone, for example, attracts the lowest 5% GST, compared to marble that attracts the highest rate. But kota stone makers want clarity on the classification to ensure that revenue authorities do not come calling on them. Recently, the government clarified that sarees, designer or embroidered, will be treated as fabric and not garment, and hence attract the lowest GST of 5%. Differential tax rates on the same kind of product should go.

The pricier products consumed by the well-off, will bear a higher tax burden, even if the rate of tax is the same as on a cheap alternative. A clean GST will ease administrative compliance. It would be useful to start an online forum for industry, especially small and medium enterprises, to raise their grievances, throw them open for public discussion, leading to resolution.

The rates for most products will go down now that excise duties and value-added tax have been subsumed in GST. Manufacturers and retailers must ensure that they stamp new prices on their pre-GST stock, instead of levying GST on top of the old maximum retail price. Surely, there is scope to converge GST rates once the tax base widens.