The GST officials in its subsequent meet will surge the lowest tax slab to 8% from 5%. State finance ministers would seem to submit their report at the end of the month to the official recommending the process to increase the revenue along with raising the lowest slab and rationalizing the slab.
Currently, GST is a four-tier slab structure that draws a tax rate of 5%, 12%, 18%, and 28%, correspondingly.
Important needed items are either privileged or taxed at the lowest slab, while the luxury and demerit items draw the highest slab. Luxury and sin goods draw a cess on top of the highest 28% slab. The same cess is used to compensate the states for the revenue loss because of the introduction of GST.
The rise in the tax slab from 5% to 8% might get an increase in the annual revenues with an addition of Rs 1.50 lakh crore. According to the calculations, a 1% rise in the lowest slab would specifically consist of the packaged food items that come up with the gain in revenue of Rs 50,000 cr annually.
Moreover, the group of ministers seems to build GST a 3-tier framework with the revamp of rates at 8%, 18%, and 28%.
If the proposal comes up with all kinds of goods and services which are presently taxed at 12% would proceed to an 18% slab. While the ministers were looking to add more items beneath different tax slabs and eliminate the items that were exempted from GST. At present, the unpackaged and unbranded food and dairy items are being privileged from GST.
Through the GST compensation rule which comes to finish on July 1, 2017. During GST execution on the date July 1, 2017, the union government has agreed to compensate states for 5 years till June 2022, and save their revenue at 14% per annum in this base year revenue of 2015-16.
But, in these 5 years because of the GST reduction on various objects, the revenue-neutral rate has been reduced from 15.3% to 11.6%.
From reports, it is mentioned that “As the revenue-neutral rate has come down and the states stare at a shortfall of about ₹1 lakh crore, efforts have to be made to make GST revenue neutral and the only way to do it, is rationalise the tax slab and check evasion,”
For instance, the number of goods drawing the highest 28% tax has fallen down from 228 to less than 35.
The upcoming 47th GST council meeting may be held in March-end or the first week of April month 2022.
