A panel of state ministers set up to suggest changes in the GST slabs may propose a single 15% levy, combining the 12% and 18% slabs, but raising the threshold rate from 5% to 8% in view of rising inflation concerns. The offer may be shelved.
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The Group of Ministers (GoM) is likely to meet this week to take a final call on GST rates and consolidate its recommendations. The GST Council is expected to meet early next month to consider the report and the revenue position of the states. The Council had set up the GoM on rate rationalization in its September 2021 meeting in Lucknow.
Now these are the rates of GST
The GST Rate Composition Group was asked to review exempted items, simplify the rate structure and suggest measures to mobilize necessary resources to expand the tax base. Currently, GST has a four-tier structure, with rates of 5%, 12%, 18%, and 28%. Additionally, there are special rates for certain commodities, such as precious metals, which complicate the arrangement. When GST was implemented in July 2017, the revenue-neutral rate was observed to be around 15.5%. The revenue-neutral rate is the rate at which there is no loss of tax revenue for the states or the Center after switching to GST. It has come down to around 11.6% due to discounts and rate cuts on several items.
May get additional annual revenue of Rs 1.5 lakh crore, but…
Raising the GST threshold rate from 5% to 8% could generate an additional annual revenue of around Rs 1.5 lakh crore, but most members believe that the timing may not be right, given inflationary concerns.
Relief possible for small online traders, final decision will be taken in the meeting of GST Council
Apart from this, there are several essentials included in the 5% slab, which can become costly if the rate is increased to 8%. An official told ET, “Most of the members agreed that the rate hike is bound to happen, but they were apprehensive about the timing.”