GST Council According to the report of news agency PTI, the proposal to do away with the five per cent slab by moving some items of mass consumption to three per cent and the rest to eight per cent categories may be considered in the meeting to be held next month. The council may also decide to cut the list of exempted items by shifting certain non-food items to the 3 per cent slab.
Currently, there are four slabs in the GST system – 5 per cent, 12 per cent, 18 per cent and 28 per cent. There are 480 items under the 18 per cent slab, of which about 70 per cent of GST collection comes. In addition, there is an exemption list of items such as unbranded and unpacked foods that do not attract levies.
While discussions are underway to increase the 5 per cent slab to 7 or 8 or 9 per cent, the final decision will be taken by the GST Council comprising finance ministers of both the Center and states, the report said. The council is likely to settle for 8 per cent GST for most items, which currently attract a 5 per cent levy.
According to an earlier FE report, the government is also planning to reduce the number of GST slabs to three from the current four. The report said that in place of 12 per cent and 18 per cent slabs, a new media slab of 15 per cent may be introduced. “The rate of 5 per cent shall be replaced by a new rate which shall be 6 per cent or 7 per cent, but the rate shall be changed in such a manner that not more than four slabs are made at any point of time.” The report said.
Every 1 per cent increase in the 5 per cent slab, which mainly includes packaged food items, will generate an additional revenue of around Rs 50,000 crore annually.
Under GST, essential goods are either exempted or taxed at the lowest rate, while luxuries and demerit items are taxed the highest. Luxury and sin items also attract cess on top of the highest 28 per cent slab. This cess collection is used to offset the revenue loss to the states due to the GST roll-out.
The GST compensation system is ending in June. The council had last year constituted a panel of state ministers, headed by Karnataka Chief Minister Basavaraj Bommai, to suggest ways to increase revenue by rationalizing tax rates and removing anomalies in the tax structure.
The panel is likely to finalize its recommendations early next month, which will be placed before the council at its next meeting by mid-May for a final decision.
The central government was obliged to compensate the states for the shortfall in their revenue due to the roll-out of the GST regime. Compensation was to be given for five years till June 2022. The Center had also agreed to protect the states’ revenue by 14 per cent per annum over the base year revenue of 2015-16.
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