• Notification Date: 08-03-2022
• Notification No: N/A

GST Council Considers Hiking the Lowest Slab Rate to 8%

The GST Council is about to enhance the rate of the lowest slab of the Goods and Services Tax (GST) from 5 to 8 per cent. The final decision will be officially declared by the ministry in the next Council meeting. According to the report, the GST department is planning on increasing the revenues. By cutting down on the exemption and deduction benefits, the Finance Ministry wants to diminish the dependence of the states on the Center for compensation.

The report will be submitted to the Council by a panel of state finance ministers by the end of March. The panel is likely to suggest the various steps that will be effective in raising the revenue. The steps for increasing the revenue would include hiking the lowest GST slab and rationalizing the same. At present, there are 4-tiers in the GST framework. The GST structure includes four tax rates, namely, 5, 12, 18, and 28 per cent.

The essential items are offered with various tax exemptions and subjected to the lowest tax slab. The luxury and demerit items, on the other hand, attract the highest slabs of GST. The luxury and sin goods are subjected to 28 per cent of GST, which is the highest tax slab. The cess collection is further utilized to compensate for the revenue losses that are faced by the states due to GST rollouts.

According to the report of the sources, the GoM will allegedly propose a hike in the lowest tax slab, from 5 per cent to 8 per cent. This step would result in an additional collection of Rs.1.50 lakh crore of revenues in a financial year. A hike in the GST rate in the lowest tax slab by 1 per cent, mainly in the revenue of the packaged food items, would yield an excess of Rs.50,000 crore of additional revenue in a year.

The GoM is looking forward to the rationalization of the GST structure. In the new GST structure, a 3-tier GST framework will be introduced comprising of 8, 18, and 28 per cent of tax rates. According to this rule, the goods and services that are subjected to 12 per cent of tax will be charged with 18 per cent of GST.

The exempted items available under the GST framework will be reduced by the GoM. The unpacked and unbranded food and dairy items are exempted from GST at present. The GST Council will possibly meet the in the latter half of this month or earlier the next month. The report of the ministry will be discussed in the meeting and the revenue position of the states will be examined.

In the last few years, the GST Council has granted the demands of trade and industry. The tax rates have often been lowered. Initially, there were 228 goods that attracted the highest tax rate of 28 per cent. The number of items was reduced to less than 35 later.

Last year, the GST Council had set up a panel of state minster, which was chaired by the Union Finance Minister. The meeting was headed by the Chief Minister of Karnataka, Basavaraj Bommai. The Council suggested the probable ways to augment revenue by rationalizing the tax rates and rectifying the anomalies in tax rates that are present in the GST framework.