Next GST Council Meeting Soon: Govt Might Consider Removing 12% Tax Rate

By the next meeting, the GST council might serve a proposal of revising Goods and Services Tax (GST) rates by cutting the number of tax slabs to three from four. This will include the removal of the 12% tax slab, said the individuals who know about the case, but they did not want to be named.

Most officials and experts advising the Group of Ministers (GoM) on GST rate changes mostly agree that the 12% slab is no longer very useful. They suggest that essential items used by the general public can be moved to the lower 5% slab, while the rest can be shifted to the higher 18% slab, according to sources.

One individual said, “This could be the most plausible way to undertake a revenue-neutral tax rate rationalisation exercise. However, the GST Council has to take a final call.”

The apex decision-making body on the indirect tax regime, the GST Council, is anticipated to hold a meeting either by the end of June or July. Members included in the council, Union finance minister and finance ministers (or senior ministers) of states have not met for a long period, since December 2024. In meeting proposals, such as revisions in tax rate, in addition to other related issues, will be discussed. These will facilitate compliance, as individuals above said.

The group of ministers (GoM) first met on September 24, 2022, as per the decision of the 45th GST Council meeting conducted in Lucknow, regarding implementing revisions in tax rates, simplifying tax structure, and correcting duty reversals. The first meeting was chaired by former Karnataka CM Basavaraj S Bommai. The meeting held in November 2023, the leadership shifted to UP finance minister Suresh Kumar Khanna and then after him to Bihar deputy CM Samrat Chaudhary on February 27, 2024.

Most officials from the central and state governments, along with experts and members of the Group of Ministers (GoM), are in favour of removing the 12% GST slab, according to one source. Currently, India follows a four-tier GST structure with tax rates of 5%, 12%, 18%, and 28%, based on the principle of lower tax on essential items and higher tax on luxury goods. Basic necessities like unpacked food, salt, milk, fresh vegetables, and services such as education and healthcare are exempt from GST to protect lower-income groups.

The 12% slab currently includes a wide variety of goods such as condensed milk, caviar and its substitutes, packed drinking water in 20-litre bottles, walkie talkies, tanks and armoured vehicles, contact lenses, cheese, dates, dried fruits, frozen vegetables, sausages, pasta, jams, jellies, namkeens like bhujiya, curry paste, mayonnaise, tooth powder, baby feeding bottles, carpets, umbrellas, caps, bicycles, some household utensils, cane or wooden furniture, pencils, crayons, jute or cotton handbags and shopping bags, footwear priced below Rs. 1,000, diagnostic kits, and marble and granite blocks.

Services that currently attract 12% GST include certain types of construction work, hotel rooms priced up to Rs. 7,500 per night, air travel in non-economy classes (with or without baggage), specific multimodal transport services, and some professional, technical, and business services. Experts welcomed the idea of scrapping the 12% slab.

In accordance with the experts, when GST revenue grows consistently, it supports the requirement for a revision in tax rates. Gross GST revenues showed an increase of Rs. 22,08,861 crore in 2024-25, while previous year, it was Rs. 20,18,249 crore in 2023-24. With the beginning of the new financial year, in the month of April, Gross GST revenue collection was recorded as the highest this year, i.e., Rs. 2,36,716 crore. In the month of May, revenue collection was recorded as Rs. 2,01,050 crore, which is the third highest record ever.