GST Council may consider increasing the lower tax rate and rationalizing the slab

The apex policy-making body of the Goods and Services Tax (GST) may consider raising the lowest tax rate from five per cent to eight per cent in the next meeting of the GST Council. Apart from this, the list of exempted products in the GST system can also be trimmed to increase the revenue and eliminate the dependence of the states on the Center for compensation.

Sources gave this information on Sunday. He said that a committee of state finance ministers is likely to submit its report to the GST Council by the end of this month, suggesting several steps like increasing the lowest tax slab and rationalizing the slab.

Currently, GST has a four-tier tax structure with tax rates of five per cent, 12, 18 and 28 per cent. Essential goods are either exempted from this tax or are kept in the lowest slab while luxury goods are kept in the topmost tax slab.

According to sources, the GoM may propose to increase the tax rate from five per cent to eight per cent, which is expected to generate an additional revenue of Rs 1.50 lakh crore annually. An increase of one per cent in the lower slab will result in a revenue benefit of Rs 50,000 crore annually, which includes packaged food items.

In order to rationalize the tax system, the GoM is also considering to make its structure three-tier, in which the tax rate can be kept at 8, 18 and 28 percent. If this proposal is approved, then all the products and services falling in the 12 per cent bracket will come under the 18 per cent slab. Apart from this, the GoM will also propose to reduce the number of items exempted from GST. At present, unbranded and unpackaged food items and dairy items are out of the purview of GST. Sources said that the meeting of the GST Council is likely to be held by the end of this month or early next month. In this, the report of the Group of Ministers will be discussed.