GST Council: The GST Council can increase the lowest tax slab from 5 percent to 8 percent in its next meeting. PTI has given this news quoting sources. A panel of state finance ministers is expected to submit its report to the council by the end of this month, suggesting several steps to increase revenue, including raising the lowest slab and streamlining the slab.
Right now there are 4 tax slabs
At present, there are four slabs in GST of 5 per cent, 12 per cent, 18 per cent and 28 per cent. Essential goods are either in the lowest slab or there is no tax on them. Luxury and dimerist items are in the highest slab. Cess is also levied on luxury and sin goods with the highest slab of 28 per cent. This cess collection is used to offset the revenue loss incurred by the states on account of the GST rollout.
Increase in 1 percent tax will increase annual revenue by Rs 50,000 crore
The agency said that increasing the tax slab of 5 per cent to 8 per cent will generate additional revenue of Rs 1.50 lakh crore annually. According to one estimate, an increase of 1 per cent in the lowest tax slab will increase annual revenue by Rs 50,000 crore. Packaged food items mainly fall in this slab.
3-tier GST structure also considered
Along with this, under rationalization, the Group of Ministers (GoM) is also considering a 3-tier GST structure with rates of 8, 18 and 28 per cent. If a proposal is passed, all goods and services with 12 per cent tax will fall in the 18 per cent slab. Besides this, the GoM will also propose to reduce the number of goods which are exempted from GST. Presently, unpacked and unbranded food and dairy items are exempted from GST.
GST compensation regime to end in June
With the GST compensation regime coming to an end in June, it is imperative that states become self-reliant and not depend on states to bridge the gap in GST collections.
At the time of implementation of GST on July 1, 2017, the Center had agreed to give compensation to the states for five years till June 2022 and protect their revenue at the rate of 14 per cent per annum on the base year revenue of 2015-16. . However, in this five-year period, the revenue neutral rate has come down from 15.3 per cent to 11.6 per cent due to reduction in GST on several items.
The next meeting of the GST Council may be held by the end of this month or early next month.