goods and services Tax (GST) Council may increase the lowest tax slab from 5 per cent to 8 per cent in its next meeting, according to a report. In form of GST Council To increase revenue and remove the dependence of states on the Center for compensation, the tax body may consider raising the lowest tax slab to 8 per cent from the existing 5 per cent in its next meeting, PTI news agency quoted sources as saying. Told happened. A panel of state finance ministers is likely to submit its report to the council by the end of this month, suggesting various steps to boost revenue, including raising the lowest slab and rationalizing slabs.
Presently, GST is a four-tier structure which is taxed at the rates of 5, 12, 18 and 28 per cent. Essential goods are either exempted or taxed in the lowest tax slab, while luxury and sin items are subject to the highest slab. Luxury and sin products attract cess on top of the highest 28 per cent slab. This cess is collected to compensate the states for revenue loss due to the implementation of GST.
Raise the lowest slab to 8 percent
According to the report, the GoM may propose to increase the 5 per cent slab to 8 per cent, which could lead to an additional Rs 1.50 lakh crore annual revenue. As per calculations, a 1 per cent increase in the lowest slab, which mainly includes packaged food items, generates a revenue of Rs 50,000 crore annually.
a short list of discounted items
In addition, the GoM may also propose to reduce the number of items that are exempted from GST. At present, unpacked and unbranded food and dairy items are exempted from GST. Sources told the news agency that the GST Council is expected to meet by the end of this month or early next month to discuss the report of the GoM and the revenue position of the states.
GST compensation system extended till March 2026
The GST compensation regime, which ended in June, has now been extended till March 2026. Union Finance Minister Nirmala Sitharaman on Wednesday said that the period of GST Compensation Cess has already been extended till March 2026 to enable the Center to repay all the loans taken for compensation. State for the year 2020. During an interaction with reporters here, he said, “It is not just a call for me. It is for the GST Council to decide and we have discussed it.”
At the time of implementation of GST on July 1, 2017, the Center agreed to compensate states for 5 years till June 2022 and protect their revenue at the rate of 14 per cent per annum on the base year revenue of 2015-16 Was. However, due to reduction in GST on several items in this 5-year period, the revenue-neutral rate has come down from 15.3 per cent to 11.6 per cent.
“As the revenue-neutral rate has come down and states are facing a shortfall of about Rs 1 lakh crore, efforts should be made to make GST revenue neutral and the only way to do this is by rationalizing tax slabs and Theft is to be stopped. ,” a source told PTI.
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