A lot of work still needs to be done to prune GST-exempted items, especially in the services sector, Revenue Secretary Tarun Bajaj said on Tuesday. Addressing a CII interactive session, Bajaj said the effort is to remove the “rough edges” in Goods and Services Tax (GST) over the next two-three years.
On rationalisation of GST rates, the secretary said a group of ministers is looking into it. “We will have to wait for some time,” he said. Exemptions still remain, a large number on the services side, Bajaj said, adding “work needs to be done to prune it”.
On representations that 5 per cent GST on non-ICU hospital rooms above Rs 5,000 is against affordable healthcare, Bajaj said the percentage of rooms in hospitals which charge more than Rs 5,000 is “minuscule”.
“If I can spend Rs 5,000 on a room, I can pay Rs 250 for GST. I don’t see any reason for such a messaging that 5 per cent GST is hitting affordable healthcare,” Bajaj said.
The secretary said the 28 per cent slab in GST contributes 16 per cent to the gross GST revenue, while the major chunk of 65 per cent comes from the 18 per cent slab.
The slabs of 5 per cent and 12 per cent contribute 10 per cent and 8 per cent of the total gross GST revenue.
Under the GST, a four-rate structure that exempts or imposes a low rate of tax of 5 per cent on essential items and a top rate of 28 per cent on cars is levied. The other slabs of tax rates are 12 per cent and 18 per cent.
Besides, there is a special 3 per cent rate for gold, jewellery and precious stones and 1.5 per cent on cut and polished diamonds.
Also, a cess is levied on the highest tax slab of 28 per cent on luxury, sin and demerit goods. The collection from the cess goes to a separate corpus — Compensation fund — which is used to make up for revenue loss suffered by the state due to the rollout of GST.