Sources said that discussions are on to raise the 5 per
cent slab to either 7 or 8 or 9 per cent, a final call
will be taken by the GST Council which comprises finance
ministers of both Centre and states.
As per calculations, every 1 per cent increase in the 5
per cent slab, which mainly includes packaged food
items, would roughly yield an additional revenue of
Rs 50,000 crore annually.
Although various options are under consideration, the
Council is likely to settle for an 8 per cent GST (Goods
and Services Tax) for most items that currently attract
5 per cent levy.
Under GST, essential items are either exempted or taxed
at the lowest rate while luxury and demerit items
attract the highest tax. Luxury and sin goods also
attract cess on top of the highest 28 per cent slab.
This cess collection is used to compensate states for
the revenue loss due to GST roll out.
With the GST compensation regime coming to an end in
June, it is imperative that states become
self-sufficient and not depend on the Centre for
bridging the revenue gap in GST collection.
The Council had last year set up a panel of state
ministers, headed by Karnataka Chief Minister Basavaraj
Bommai, to suggest ways to augment revenue by
rationalising tax rates and correcting anomalies in the
The group of ministers is likely to finalise its
recommendations by early next month, which will be
https://www.business-standard.com/ placed before the
Council in its next meeting, likely by mid-May, for a
At the time of GST implementation on July 1, 2017, the
Centre had agreed to compensate states for five years
till June 2022 and protect their revenue at 14 per cent
per annum over the base year revenue of 2015-16.
The GST Council over the years has often succumbed to
the demands of the trade and industry and lowered tax
rates. For example, the number of goods attracting the
highest 28 per cent tax came down from 228 to less than
With Centre sticking on its stand not toextend GST
compensation beyond five years, states are realising
that raising revenues through higher taxes is the
only option before the Council.