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States panel may propose a single 15% GST levy by
merging 12% and 18% slabs
A panel of state ministers set up to suggest changes to
the GST rate structure may propose a single 15% levy by
merging the 12% and 18% slabs, but is wary of proposing
an increase in the threshold rate to 8%, from 5%, given
growing inflation concerns.
The group of ministers
(GoM) is likely to meet this week to take a final call
on rates and firm up its recommendations, people
familiar with deliberations said. The GST Council is
expected to meet early next month to consider the report
and the revenue status of the states.
The council had set up the
GoM on rate rationalisation at its September 2021
meeting in Lucknow.
Rate Structure
The group was asked to
review exempt goods to expand the tax base, suggest
changes to simplify the rate structure and garner the
required resources.
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The GST has a four-tier structure, consisting of 5%,
12%, 18%, and 28% rates. Additionally, there are special
rates for some goods such as precious metals, making the
regime complex. When GST was rolled out in July 2017,
the revenue-neutral rate was seen at about 15.5 per cent
Revenue-neutral rate is the rate at which there is no
loss of tax revenue for states or the Centre following
the switch to GST. That peg has since dragged down to
about 11.6% because of exemptions and reductions in
rates on many goods
Raising the GST threshold rate to 8%, from 5%, could
lift it by yielding additional annual revenues of about
Rs 1.5 lakh crore. But most members are of the view that
the timing may not be right given inflationary concerns,
sources said. Besides, the 5% slab includes many
essentials, which could become expensive if the rate is
raised to 8%.
One of the persons said some of GoM members instead
favoured a merger of the 12% and 18% slab into a common
15% levy, along with raising the cess on so-called sin
goods. "Most of the members agreed that a rate hike is
imminent but were apprehensive of (the) timing," an
official told ET.
Source:::THE ECONOMIC TIMES,
dated 21/03/2022.
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