• Notification Date: 21-03-2022
• Notification No: N/A

State Government to Propose a Composite 15% GST Merging 12% and 18% Slabs

A panel of Ministers from the State Government has brought up the suggestion of combining the 12 per cent and 18 per cent GST slabs to form a composite 15 per cent rate of GST. Due to the growing inflation in the economy, the panel is wary to suggest an increase the 5 per cent threshold rate to 8 per cent.

The final decision regarding the possible hikes that are to be brought in the GST rates will be taken in a meeting attended by the group of ministers (GoM) this week. The panel of ministers will discuss the recommendations and the rates of the GST framework. The Council will be meeting early in the upcoming month. The report will be examined and the revenue status of the states will be considered in the meeting.

The meeting to decide the rate rationalization was set up by the GST Council on September 2021 in Lucknow.

GST framework consists of four slabs of tax rates. There are 5%, 12%, 18%, and 28% rates of tax in the GST structure. Apart from these rates, there are certain addition rates for some specific goods. The special rates of GST are applicable for precious metals, which makes the regime more complex. GST was first introduced in July 2017. At that time, the revenue-neutral rate was about 15.5%.

The revenue-neutral rate refers to the rate at which there is no loss in the collection of tax for the Central or State Government after switching to the GST framework. The rate has been reduced to 11.6% due to the various exemptions and deductions available for many goods under the GST law.

If the GST threshold of 5% is hiked to the rate of 8%, then it would yield additional revenue worth Rs.1.5 lakh crore. The items included under the 5 per cent slab of GST comprise many essential goods. Hiking the rate of GST would result in the enhancement of price for these products.