News - 4-tier GST rate may lead to classification disputes

  • Four-tier GST rate structure will cause classification disputes as businesses to demand lower rate for their goods or services.
  • Present discussion on two standard GST rates (12 % & 18 %), a lower rate (5 %) and a higher rate (28 %) in addition to exemptions will make the design of GST complicated.
  • Voices are already raised to put plantation crops, labour intensive manufacturing, infrastructure inputs and air fares under lower tax bracket. 
  • The objective behind imposition of cess is to generate revenue to compensate the states on account of any revenue loss but It is not clear whether the cess will be imposed with a sunset clause or it will continue as an additional source of revenue for the Central Government. 
  • The imposition of cess without provision for input tax credit (like Swachh Bharat Cess) will result in cascading of taxes and it will go against the fundamental advantage of introducing GST.

 

Source – Economic Times