GST panel may consider dropping 12% slab

The fitment committee under the Goods and Services Tax (GST) Council, comprising central and state officials, has begun a rate rationalisation exercise afresh, checking the possibility of dropping some of the rates, particularly the 12 per cent slab, to achieve a revenue-neutral structure.

The GST regime could see an overhaul in the current financial year (FY2025) as it may move to a three-slab structure from the existing four. The current rate structure comprises standard rates of 5 per cent, 12 per cent, 18 per cent, and the highest rate of 28 per cent. Besides, it has zero and special rates for certain goods and services.

The fitment committee started holding meetings on the issue and preparing inputs towards revamping tax rates and possible implications, which will be submitted in July to the Group of Ministers set up by the GST Council to suggest changes to the rate structure. The revenue department expects revamped tax rates to be implemented in FY2025.

The move follows the stability in GST collections, which had crossed the ₹2 trillion mark in April. They are expected to garner ₹1.7-1.8 trillion every month during the year.

Rate rationalisation is a priority as the current tax structure needs to be streamlined to remove certain ambiguity.

Rationalisation could shift goods across slabs, so any decision on the issue to be taken after extensive deliberations.

While certain goods fall under zero rates. The majority of the revenue comes from the 18 per cent GST slab, followed by the 28 per cent GST slab which adds 16 per cent of the total GST revenue. The remaining is from 5 and 12 per cent slabs.

Experts said that it is pertinent to streamline the tax structure for better revenue augmentation.

A significant portion of litigation under GST concerns the classification of supplies and the applicable GST rates. A simplified rate structure would automatically reduce potential disputes over taxes charged as, most similar goods would fall under the same GST rate.

The seven-member rate rationalisation state ministers panel is being headed by UP Finance Minister Suresh Khanna. The panel includes finance ministers from Goa, Kerala, Karnataka, West Bengal, Rajasthan and Bihar.

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