No friction between Centre-States on GST; federal structure should be respected: Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman on Thursday (September 5, 2024) denied the “rhetoric” of some Opposition leaders who claim that there is bitterness and friction between the Centre and the States on the Goods and Services Tax (GST) front.

“The federal structure has to be respected and taken together if you want to have a taxation system where revenue generation happens without pain on the taxpayers. The revenue generation happens when both the Centre and the States can work together both in developmental activities and also in widening the tax base,” she said, speaking on the topic ‘The Finance Minister’s Insight: Path Forward’, at an event organised by the Revenue Bar Association in Chennai.

“I certainly deny the narrative that there is friction between the Centre and States on GST related matters, because I see what happens in the GST Council meetings,” Ms. Sitharaman said.

“People belonging to different political parties as Finance Ministers, when they come to the GST Council, they speak about how we have to work to ensure there is greater simplification, greater rationalisation of GST rates and of course, revenue generation. GST Council meeting is the place where least of politics work,” she said.

Ms. Sitharaman said the spirit of revenue generation both at the Centre and at the State level is aimed at addressing tax evasion, and finding ways to ease compliance by simplifying the GST system. These are the issues that the Ministers who sit in the GST Council meetings are focussed on, she said.

“They also want to be sure that taxation, where it can be brought down, we will bring it down. And that is the spirit with which I think we will be working,” Ms. Sitharaman said, reiterating the Centre’s commitment to simplifying tax compliance.

She noted that the GST rate is much below the revenue neutral rate. When GST was first implemented in 2017, the revenue neutral rate was 15.3%, while the average GST rate has decreased to 12.2% as of 2023, Ms. Sitharaman said.

The Union Finance Minister also pointed out that “GST is not a burden on common people”. Citing a recent survey, she said that nearly 60% of all consumer items attract a GST rate of 5% or less, while less than 3% of consumption items are in the 28% bracket. She added that 84% of industry respondents have also responded positively to GST as per the survey.

The GST Council has formed a Group of Ministers (GoM) who are looking at rate reduction and rationalisation, she said. “In the upcoming meeting of GST Council on September 9, a beginning will be made in understanding what the GoM has done till now and where we stand on and from there on take the discussion further about reducing or rationalising rates,” Ms. Sitharaman said.

“The meeting will not finalise the rate reduction. I don’t want false expectation. This meeting will be the first time we will look at what GoM have said and current status report would be given, post which discussions will start,” she said.

Published - September 05, 2024 05:11 pm IST