GoM may Propose 15% Merged Levy

A panel of state minister’s setup to suggest changes to the GST rate structure may propose a single 15% levy by merging the 12% and 18% slabs, but is wary of proposing an increase in the threshold rate to 8%, from 5%, given growing inflation concerns.

The group of ministers (GoM) is likely to meet this week to take a final call on rates and firm up its recommendations, said The GST council is expected to meet early next month to consider the report and the revenue status of the states.

The council had set up the GoM on rationalization at its September 2021 meeting in Lucknow.

The group was asked to review exempt goods to expand the tax base, suggest changes to simplify the rate structure and garner the required resources.

The GST has a four-tire structure, consisting of 5%, 12%, 18% and 28% rates.

Additionally, there are special rates for some goods such as precious metals, making the regime complex. When GST was rolled out in July 2017, the revenue neutral rate was seen at about 15.5%.

Revenue-neutral rate is the rate at which there is no loss of tax revenue for states or the Centre following the revenue for states or the Center following the switch to GST. That peg has since dragged down to about 11.6% because of exemptions and reductions in rates on many goods.

Raising the GST threshold rate to 8%, from 5%, could lift it by yielding additional annual revenues of about Rs 1.5 lakh crore. But most members are of the view that the timing may not be right given in factionary concerns, source said. Besides, the 5% slab includes many essentials, which could because expensive if the rate is raised to 8%.

One of the persons said some GoM members instead favourured a merger of the 12% and 18% slab into a common 15% levy, along with raising the Cess on so called sin goods. “Most of the members agreed that hike is imninent but were apprehensive of (the) timing,” an official told ET.

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