Even as the government announced rationalisation of income tax rates in the Budget, there is also work going on to simplify and rationalise the Goods and Services Tax (GST) regime. Discussions between Centre and states have taken place to undertake not just GST rate rationalisation but also simplify the structure, with a particular focus on doing away with the 12 per cent slab, The Indian Express has learnt.
The ministerial panel formed under GST to oversee rate rationalisation is learnt to have held threadbare discussions on the items in each of the key slabs — zero, 5 per cent, 12 per cent, 18 per cent and 28 per cent — and whether the items need to be moved to a higher or lower slab. But, even after the detailed exercise, the 12 per cent GST slab was proposed to be retained by the panel, along with the other three key slabs. This was flagged in internal discussions as being inconsistent with the objective of reducing the number of slabs, sources said.
“Members of the GoM on GST rate rationalisation discussed all items in various slabs in detail, following which they recommended moving certain items to other rate slabs, especially from the 12 per cent to 18 per cent or 5 per cent slabs. However, it still sought to retain the 12 per cent slab with some items, which goes against the exercise that was aimed at not just rate rationalisation, but also simplification of the GST regime,” a source said.
The panel has now decided to revisit the matter, and will be holding more deliberations, the source added.
Earlier in internal discussions regarding GST rate rationalisation, a proposal has been discussed to merge the 12 per cent and the 18 per cent slabs to create a new 15 per cent slab, and have only a three-slab structure. However, merging the two slabs did not gain broad consensus because the revenue loss from shifting the items from the 18 per cent slab to 15 per cent would be far greater than the gains from raising the GST rate on the items in the 12 per cent slab to 15 per cent. A higher rate than 12 per cent was also flagged as a point of concern for some of the items linked to pharmaceuticals that could then see a higher levy with a new rate of 15 per cent.
Reducing items in the 18 per cent slab is also not simple as around 70-75 per cent of the GST revenue comes from the items in the 18 per cent slab, while 12 per cent rate accounts for just 5-6 per cent.
Currently, the GST has a multi-tier structure —zero, 5, 12, 18, and 28 per cent — with additional levy of compensation cess over and above the highest rate of 28 per cent on sin and luxury items.
The GST Council in its 55th meeting held in Jaisalmer last month had held discussions on lowering rates on several items. However, it decided to defer a key decision to lower the tax rate on health and life insurance premiums. The GoM on rate rationalisation had sought more time to discuss the proposal to tweak rates on as many as 148 items, which.is expected to come up for discussion in the next meeting of the GST Council.
Source: The Indian Express
