Work needs to be done to prune GST exemption in services: Revenue Secy

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, Mr. Bajaj said efforts are on 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, Mr. Bajaj said, adding ‘work needs to be done to prune it.’

On representations that 5% GST on non-ICU hospital rooms above ₹5,000 is against affordable healthcare, Mr. Bajaj said the percentage of rooms in hospitals which charge more than ₹5,000 is “minuscule”.

“If I can spend ₹5,000 on a room, I can pay ₹250 for GST. I don’t see any reason for such a messaging that 5% GST is hitting affordable healthcare,” Mr. Bajaj said.

The Secretary said the 28% slab in GST contributes 16% to the gross GST revenue, while the major chunk of 65% comes from the 18% slab.

The slabs of 5% and 12% contribute 10% and 8% of the total gross GST revenue.

Under the GST, a four-rate structure that exempts or imposes a low rate of tax of 5% on essential items and a top rate of 28% on cars is levied. The other slabs of tax rates are 12% and 18%.

Besides, there is a special 3% rate for gold, jewellery and precious stones and 1.5% on cut and polished diamonds.

Also, a cess is levied on the highest tax slab of 28% 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.