The Group of Ministers (GoM) on Goods and Services Tax (GST) rate rationalisation is likely to push for phasing out the 12 percent tax slab by gradually shifting items to either the 5 percent or 18 percent slabs to simplify the tax framework and ease compliance for businesses, people familiar with the development said.
The gradual elimination of the 12 percent slab will consolidate the GST system into a three-tiered structure of 5 percent, 18 percent, and 28 percent rates.
“This is a strategic alternative to the lack of consensus on merging the 12 percent and 18 percent slabs, which has been under discussion for some time,” one of the people cited above said, requesting anonymity.
The 12 percent slab is likely to be rendered redundant, the second person said, also declining to be named.
With India’s indirect tax system overhaul now in its eighth year, policymakers are under pressure to rationalise the GST structure.
The GoM on rate rationalisation, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, is expected to submit its recommendations by October, with the GST Council likely to discuss the suggestions in the meeting in November.
“While moving items out of the 12 percent slab is the way forward, it will take time, as states will carefully examine the revenue implications before agreeing,” the person said.
Last month, West Bengal Finance Minister Chandrima Bhattacharya, a member of the GoM, said, “The focus is on tweaking tax rates on certain items, including bringing down rates from 12 percent to 5 percent. However, there is no consensus on merging slabs.”
The six-member GoM, chaired by Chaudhary, also includes Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Karnataka Revenue Minister Krishna Byre Gowda and Kerala Finance Minister K N Balagopal.
The GoM was reconstituted on November 1, 2023, to examine the GST rate structure. The group will meet again on October 20, 2024, to continue deliberations on rate rationalisation.
Source: Money Control
