In the next meeting of GST Council, medicines and tractors under 12 per cent tax can be discussed. The GST Council wants to reduce the number of slabs. It may be agreed to abolish 12 per cent tax slab. However, before this, the states will assess its economic and social impact. Sources associated with the case told Moneycontrol about this. The next meeting of the GST Council is expected to be held before the monsoon session of Parliament.
Government loses 4000 crores in revenue
The government may have a revenue loss of Rs 3,000-4,000 crore by abolishing taxes on medicines and tractors under 12 per cent tax slab. If 12 percent tax slab is abolished, apart from English medicines, Ayurvedic, Hayamopathy, animal medicines and surgical dressings will have to be transferred to 5 % GST slab. The tractor cannot be transferred to 18 % GST slab, as it falls in the agricultural equipment category. In such a situation, to avoid tax innovation, it will have to be excluded from the scope of tax without input tax credit.
Input tax credit case stuck on tractors
Tax innovation means a situation in which taxes on the things used in making a product (raw materials, components) are more than the tax rates on the product. Due to this, companies are unable to fully use the input tax credit (ITC) accumulation. This affects their cash flow. It is said that it has been agreed to a large extent on abolishing 12 percent tax slab.
Drugs can be transferred to 5 % tax slab
A source of the government said that it has been agreed to abolish the 12 per cent tax slab. But the loss of Rs 3000-4000 crore in the revenue will have to be repaid on other items. More items can be removed from this slab. But, two items and tractors are stuck about two items and tractors. Sources said that if these drugs are inserted into a 5 % slab, there will be a big loss in the revenue.
Taxes can increase on luxury goods to compensate loss
A source said that there is 12 per cent tax on medicines, they will have to transfer 5 per cent to slabs, which will reduce the revenue. As far as tractors are concerned, it is being considered to completely eliminate the tax. The reason for this is that it cannot be kept under 18 percent slab. In such a situation, it can be an option to bring it out of tax only without ITC. Removing 12 per cent tax slab can be increased on luxury goods to compensate for the damage to revenue.