PwC India report calls for a three tier GST rate structure, subsuming petroleum products in tax levy

As the goods and services tax completes eight years on July 1, industry and experts await key reforms in the indirect tax levy. A new report by PwC India has also highlighted several of these issues while calling for a three-rate structure under GST and including petroleum products under the purview of the indirect tax system.
“Currently, there are various tax rate slabs under the GST law. A transition from a 4-tier to a 3-tier rate structure would reduce interpretational disputes, improve tax certainty, and simplify compliance,” said the report titled ‘Eight years of GST: A time to reflect, a time to reform’.
A comprehensive review of GST rate slabs is required to minimise the disparity between the GST rate on inputs as against that on output, especially for sectors such as electronic vehicles, aviation, and e-commerce, which face credit accumulations on account of the inverted tax structure, it further said. The report has also called for subsuming petrol, diesel, natural gas, and other petroleum products within GST.
The GST Council is expected to meet soon, and it is likely to take up the issue of rationalisation of the tax structure, which has also been indicated by Union Finance Minister Nirmala Sitharaman.
The report has also suggested that the levy of the compensation cess may be removed or, if needed, may be incorporated in the GST rate structure. “This would simplify the tax system, reduce distortions, free up stranded credits and supporting ease of doing business,” it said.
Significantly, the report also noted that one of the key reforms undertaken in recent years has been the operationalisation of the GST Appellate Tribunal (GSTAT) but it is yet to appoint its members and commence operations.
“The operationalisation of GSTAT addresses the longstanding gap in the appellate framework, which had resulted in an increased burden on the High Courts,” it said, adding that with the formal notification of the procedural rules, appointment of the President of GSTAT, and notification of state benches across the country, the appellate structure is almost operational.
Overall, it has highlighted that the next phase of GST must prioritise rationalising rates, reducing blocked credits in line with the neutrality principle, broadening the tax base, and removing procedural bottlenecks and to restore the originally intended neutrality and efficiency of the system.
“Embracing global best practices, dispute resolution, and digital economy alignment will be crucial to minimise litigation and foster a business-friendly environment,” said the report Leveraging advanced technologies such as artificial intelligence can further streamline compliance and administration, provided robust safeguards are in place, it further said.