GST rate rationalisation: GOM to discuss slab, rate tweaks on September 25

A ministerial panel in charge of reviewing Goods and Services Tax (GST) rates is set to meet on September 25, 2024, to discuss possible changes to the current tax slabs and rates, reported news agency PTI.

The meeting, which will take place in Goa, is part of the ongoing efforts to streamline and rationalise the GST structure. This panel, known as the Group of Ministers (GoM), is led by Bihar Deputy Chief Minister Samrat Chaudhary.

The GoM, which consists of six members, last met on August 22. They submitted a status report to the GST Council on September 9, outlining their initial findings. One of the key areas of focus has been evaluating the impact of changing tax rates on certain goods and services.

At present, the GST system in India operates on a four-tier structure. Goods and services are taxed at different rates, depending on their category, which are 5%, 12%, 18%, and 28%.

Essential goods, such as food items, are either exempt from GST or are taxed at the lowest slab of 5%. In contrast, luxury and demerit goods (which include items like cars and tobacco products) are placed in the highest slab of 28%. Additionally, some of these items also attract a cess, which is levied on top of the 28% GST.

Possible changes in GST slabs

There has been ongoing discussion about merging the 12% and 18% GST slabs into one unified rate. However, no formal proposal has been made so far.

The current average GST rate is around 12%, which is lower than the revenue-neutral rate of 15.3%. A revenue-neutral rate is the rate at which the government neither loses nor gains revenue after the implementation of GST.

The lower-than-expected average rate has raised concerns about revenue generation, prompting the GoM to initiate discussions on possible adjustments to the current tax rates.

Not all states are in favour of changing the GST structure. West Bengal and Karnataka, in particular, have expressed reservations about making any immediate changes to the tax slabs.

After the August meeting, West Bengal Finance Minister Chandrima Bhattacharya commented that she did not support altering the existing GST rates. She argued that the current structure should remain untouched for now.

Similarly, Karnataka Revenue Minister Krishna Byre Gowda noted that the GST system has largely stabilised in recent years, and any changes could disrupt this balance. He suggested that the panel should carefully analyse the need for any adjustments before making decisions. “What do you achieve by disturbing it?” he asked, adding that the GoM would revisit the issue in the upcoming meeting.

During the last meeting in August, the GoM tasked the fitment committee—comprising tax officers from both the Centre and the states—with collecting more data and analysing the potential impact of tax rate changes on various items.

The data gathered by this committee will be crucial in determining whether any adjustments should be made to the GST slabs and rates.

The panel, in its upcoming meeting, is expected to delve deeper into these matters, discussing whether the current GST structure should be altered to meet the country’s evolving economic needs.

Members of the GoM
The six-member Group of Ministers (GoM) on GST rate rationalisation is chaired by Bihar Deputy Chief Minister Samrat Chaudhary. The other members include Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Services Minister Gajendra Singh, Kerala Finance Minister K N Balagopal, West Bengal Finance Minister Chandrima Bhattacharya, and Karnataka Revenue Minister Krishna Byre Gowda.