GST Council may consider proposal to increase the lowest slab to 8 percent, rationalize tax slabs
Highlight
- A panel of state finance ministers may submit its report by the end of this month
- The report will suggest various steps to increase revenue
- Presently, GST is a four-tier structure, which is taxed at the rates of 5, 12, 18 and 28 per cent.
The GST Council in its next meeting may consider raising the lowest tax slab from 5 per cent to 8 per cent, and reducing the exemption list in the Goods and Services Tax regime as it seeks to increase revenue and remove dependence on states. looks for. On the Center for compensation, sources said on Sunday.
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 slab, while luxury and demerit items are subject to the highest slab. Luxury and sin items attract a cess on top of the highest 28 per cent slab. This cess collection is used to compensate states for revenue loss due to GST rollout.
According to sources, the GoM may propose to increase the slab of 5 per cent to 8 per cent, which could lead to an additional revenue of Rs 1.50 lakh crore annually. As per calculations, a 1 per cent increase in the lowest slab, which mainly includes packaged food items, results in a revenue of Rs 50,000 crore annually.
As part of rationalization, the GoM is also considering a 3-tier GST structure, with rates of 8, 18 and 28 per cent.
If the proposal is passed, all goods and services that are currently taxed at 12 per cent will fall in the 18 per cent slab.
In addition, the GoM will also propose to reduce the number of items exempted from GST. At present, unpacked and unbranded food and dairy items are exempted from GST.
Sources said 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.
With the GST compensation regime coming to an end in June, it is imperative that states become self-reliant and not depend on the Center to bridge the revenue gap in GST collections.
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.
“Since 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 reducing evasion. have to stop.” A source said.
Over the years, the GST Council has often succumbed to the demands of trade and industry and lower tax rates. For example, the number of items attracting the highest 28 percent tax decreased from 228 to less than 35.
The council, headed by the Union Finance Minister and headed by state counterparts, had last year set up a panel of state ministers, headed by Karnataka Chief Minister Basavaraj Bommai, to rationalize tax rates and remove discrepancies in tax rates. Will suggest ways to increase.
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