The fitment committee under the Goods and Services Tax (GST) Council, comprising central and state officials, has begun a rate rationalisation exercise afresh, checking the possibility of dropping some of the rates, particularly the 12 per cent slab, to achieve a revenue-neutral structure, a senior official with direct knowledge of the matter told Business Standard.
The GST regime could see an overhaul in the current financial year (FY25) as it may move to a three-slab structure from the existing four.
The current rate structure comprises standard rates of 5 per cent, 12 per cent, 18 per cent, and the highest rate of 28 per cent. Besides, it has zero and special rates for certain goods and services.
The fitment committee started holding meetings on the issue and preparing inputs towards revamping tax rates and possible implications, which will be submitted to the Group of Ministers set up by the GST Council to suggest changes to the rate structure. The revenue department expects revamped tax rates to be implemented in FY25.
“Rate rationalisation is a priority as the current tax structure needs to be streamlined to remove certain ambiguity,” an official said.
He further said that the Council, which is expected to meet after the July Budget, is likely to discuss the rate rationalisation road map.
The move follows the stability in GST collections, which had crossed the ₹2 trillion mark in April. They are expected to garner ₹1.7-1.8 trillion every month during the year. An email to the finance ministry seeking comment on the matter remained unanswered until the time of going to press.
“Rationalisation could shift goods across slabs, so any decision on the issue to be taken after extensive deliberations,” another official said.
The seven-member rate rationalisation state ministers panel is being headed by UP Finance Minister Suresh Khanna. The panel includes finance ministers from Goa, Kerala, Karnataka, West Bengal, Rajasthan, and Bihar. This panel was reconstituted in November last year, in light of the state government’s political shift. The former state panel on the matter under the chairmanship of Karnataka’s finance minister and chief minister Basavaraj Bommai had presented an interim report in June 2022’s council meeting and sought more time for the final recommendations.
The new panel is likely to be rejigged again because of the necessity to replace one of its members, Vijay Kumar Chaudhary, the former finance minister of Bihar, following a change in the state government.
Over 1,200 items and services attract GST. Other than the standard rates, the tax structure also has some special rates: 0.25, 1.5, and 3 per cent.
While certain goods fall under zero rates. The majority of the revenue comes from the 18 per cent GST slab, followed by the 28 per cent GST slab which adds 16 per cent of the total GST revenue. The remaining is from 5 and 12 per cent slabs.
Source: Business Standard
