Rate tweaks to make up for inefficiencies in value chain; states conscious of inflation impact: FM

Updated: few hours ago

Rate tweaks to make up for inefficiencies in value chain; states conscious of inflation impact: FM

Chandigarh, Jun 29 (PTI) Finance Minister Nirmala Sitharaman on Wednesday said any increase in GST rates under the rate rationalisation exercise is intended to make up for the 'inefficiencies' in the value chain.

Stating that all states are aware of the potential impact of rate rationalisation on inflation, Sitharaman said any increase in tax rates will also make up for the tax burden, which is being borne by some other activities in that value chain.

"Technology may correct anomalies for inefficiencies and therefore may have a possible impact on revenue collection. But the revenue-neutral rate of the RBI study has been breached to the disadvantage of the system… That calls for a correction…," Sitharaman told reporters after the 47th Council meeting here.  As per an RBI study, the weighted average tax rate under the Goods and Services Tax (GST) has come down to 11.6 per cent, from 14.4 per cent at the time of the launch.  The revenue-neutral rate under GST should be about 15.5 per cent, as per the Subramanian Committee report, which was submitted before the GST launch.  Sitharaman said huge refunds are being given out due to duty inversion in certain cases and that needs to be corrected.