State ministers are ready to recommend the amendments to the GST rate framework might ask for the single 15% levy via integrating the 12% and 18% slabs, however, aware of proposing the rise in the limit rate to 8% from 5%, provide rising inflation concerns.
The group of ministers (GoM) seems to meet this week to opt for the final call on the rates and to take a final decision on its suggestions, who knows the situation. The GST council seems to meet the early next month to acknowledge the report and the revenue status of the states. The council has formed the GoM on the rationalization of the GST rate at its September 2021 meeting in Lucknow.
Framework of GST rate
The group was asked to review the exempt goods for the elongation of the tax base, recommended amendments to rectify the rate structure and insert the needed resources.
GST poses four-tier structure, consisting of 5%, 12%, 18%, and 28% rates. Moreover, there are some special rates for some goods like precious metals, building compliance difficult. When the GST was started in July 2017, the revenue-neutral rate was revealed at nearly 15.5%.
Revenue neutral rate is known as a rate at which there is no loss of the tax revenue towards the states or center subsequent to switching to GST.
Raising the GST limit rate to 8% from 5% can increase it through additional yearly revenues of nearly Rs 1.5 lakh crore. However, the majority of the members are recommending that the timing might not be correct.
One of the individuals mentioned that merged the 12% and 18% to 15% and increase the cess on the sin goods. “Most of the members agreed that a rate hike is imminent but were apprehensive of (the) timing,” the tax expert specified.
