GST States panel may suggest single GST levy by merging 12% and 18% slabs; Click here to State Panel Suggestions

The Goods and Services Tax slabs may be reduced to Single 15% GST Slab , which may come as a welcome relief to many. A panel of state ministers is all set up to explore modifications to the GST rate structure.

A panel of state ministers tasked with recommending adjustments to the GST rate structure is considering merging the 12 percent and 18 percent slabs to create a single 15 percent levy, but is leery of proposing a rise in the threshold rate to 8% from 5%, citing rising inflation worries.

According to those familiar with the discussions, the group of ministers (GoM) is expected to convene this week to make a final decision on rates and solidify its recommendations. The GST Council is scheduled to convene early next month to discuss the report and the states’ revenue situation.

At its September 2021 meeting in Lucknow, the council established the GoM on rate rationalisation.

Rate Structure in GST

The GST is divided into four tiers, with rates of 5%, 12%, 18%, and 28%. The regime is complicated by the fact that some items, such as precious metals, are subject to special rates. When GST was first announced in July 2017, the revenue-neutral rate was estimated to be around 15.5 percent.

The revenue-neutral rate is the point at which neither the states nor the central government loses revenue as a result of the GST transition. Because of exemptions and rate reductions on several commodities, the rate has since fallen to roughly 11.6 percent.

If the GST threshold rate is increased from 5% to 8%, it might produce an additional Rs 1.5 lakh crore in annual revenue. However, most GoM members believe that the current timing for adjusting GST rates is insufficient due to inflation. according to sources

Some members favour combining the 12% and 18% slabs into a single 15% levy, as well as raising the cess on so-called sin goods.

“The majority of members agreed that a rate raise is coming, but they were concerned about the timing,” an official added.