The GoM on rate rationalisation was first constituted on
September 24, 2021 as per the decision of the 45th GST
Council meeting held in Lucknow with the mandate of rate
rationalisation, simplification of tax structure and
correcting duty inversions. At first ,its convener was
former Karnataka CM Basavaraj S Bommai. Later, in November
2023, the convenorship went to UP finance minister Suresh
Kumar Khanna. After that Bihar deputy CM Samrat Chaudhary
became its convener on February 27, 2024.
The decision to do away with the 12% slab is endorsed by
most Union and state government officials, experts and GoM
representatives , the first person added.
Currently, India has a four-slab GST regime – 5%, 12%, 18%
and 28%, broadly following the principle of lower tax on
necessities and higher tax on luxury items. The poor are
protected with zero tax on essentials such as unpacked food
items, salt, milk, fresh vegetables, educational and health
services.
The 12% tax slab includes items such as condensed milk,
caviar and caviar substitutes prepared from fish eggs,
drinking water packed in 20 litre bottles, walkie talkies,
tanks and other armoured fighting vehicles, contact lenses,
cheese, dates and dried fruits, frozen vegetables, sausages
and similar meat products, pasta, jams and jellies, fruit
juice-based drinks, namkeens including bhujiya, curry paste,
mayonnaise, tooth powder, feeding bottles, carpets,
umbrellas, caps, bicycles, specific household utensils,
furniture made of cane or wood, pencils and crayons,
handbags and shopping bags made of jute or cotton, footwear
priced lower than 1,000, diagnostic kits, and marble and
granite blocks.
Services attracting 12% GST include specified construction
work,hotel rooms up to 7,500 per day, transport of
passengers by air —with or without accompanied belongings --
in non- economy classes, certain types of multimodal
transportation, and specific professional, technical and
business services.
Experts welcomed the idea of scrapping the 12% slab.
Saurabh Agarwal, tax partner at consultancy firm EY India
said: “The upcoming GST Council meeting will focus on rate
rationalisation, with indications that the Council may
eliminate the 12% slab in favour of a simplified three-rate
GST structure. This change could enhance compliance, reduce
classification disputes, and improve efficiency.”
Agarwal added that the exercise will require balance,
because revenue neutrality (the changes not having any
impact on the overall tax revenue) is key.
“Revenue neutrality is essential, as the 12% slab currently
includes mass-consumption goods and industrial inputs.
Transitioning these to the 5% or 18% slabs will have varied
revenue implications, requiring careful assessment to
maintain accessibility. The inflationary impact is also a
concern. Moving items from the 12% to the 18% slab could
raise costs for semi-essential goods, potentially burdening
consumers. A phased approach is necessary to mitigate price
increases.”
Additionally, classification challenges may arise during the
transition, leading to interpretational issues for
businesses, Agarwal said. “Clear guidelines will be crucial
to ensure a smooth shift. Aligning with global practices,
many advanced GST/VAT regimes use one or two standard rates.
Thus, adopting a three-rate structure would bring India
closer to these standards while allowing for socio-economic
flexibility,” he said. “In summary, while a simplified GST
structure is promising, its success will depend on careful
design and stakeholder consultation.”
According to experts, continued growth in gross GST revenues
supports the need for rate rationalisation. Gross GST
revenues saw over 9% jump to 22,08,861 crore in 2024-25 as
compared to 20,18,249 crore in 2023-24. The new financial
year saw record collection in the month of April this year
at 2,36,716 crore. The revenue in the next month (May 2025)
also was the third highest ever at 2,01,050 crore.
Source::Hindustan Times ,
dated 05/06/2025.