The GST Council may consider increasing the lowest GST slab from 5 percent to 8 percent in its next meeting. Additionally, exemptions in the Goods and Services Tax regime can also reduce inventory. This step can be taken to increase the revenue and remove the dependence of the states on the Center for compensation. A source has given this information 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 kept in the lowest slab or in the exempted bracket while luxury and demerit items are kept in the highest slab. Cess is levied on them under the highest 28 per cent slab. This cess collection is used to compensate the revenue loss to the states due to the GST rollout.
According to the source, it may be proposed to increase the 5 per cent slab to 8 per cent, which could lead to an additional revenue of Rs 1.50 lakh crore annually. If seen, an increase of 1 per cent in the lowest slab would yield a revenue of Rs 50,000 crore annually. Packaged food items mainly fall in this slab. As part of rationalization, the GoM is also considering a 3-tier GST structure, with rates of 8, 18 and 28 per cent.
Besides this, the GoM will also propose to reduce the number of items which are exempted from GST. At present, unpacked and unbranded food and dairy items are exempted from GST.