GST slabs recast very much on the table, says FM

Rationalisation of the Goods and Service Tax (GST) rates and change in slabs are “on the discussion table,” finance minister Nirmala Sitharaman said on Tuesday, adding that a fresh process will be initiated in this regard at the GST Council meeting on September 9.

The minister’s statement indicates the Narendra Modi 3.0 government will accord high priority to the much-awaited structural overhaul of the comprehensive indirect tax.

A committee of officers will present the status of the current GST rates and the revenue trends after the GST was rolled out in July 2017 at the 54th Council meeting.

The re-constituted Group of Ministers, headed by Bihar deputy chief minister Samrat Choudhary, would make a detailed presentation in front of the Council on the work done so far and the unfinished agenda. “A short discussion on rate rationalisation may happen among ministers in the Council,” Sitharaman said. She, however, added that any decision on the rate rejig would take longer as the GoM would need time to prepare its recommendations.

Official sources said that the GoM is currently looking into various aspects of rate rationalisation. This includes ascertaining whether commodities of similar nature have the same GST rates so that there are no classification disputes. Reducing the number of slabs from four now to three is under consideration.

The reconstituted GoM had its first meeting last week, after which state finance ministers who are a part of the ministerial panel spoke against the need to tweak the four major tax slabs under the indirect tax regime.

The GST Council meets at least once in a quarter.

At present, the GST structure has four slabs – 5%, 12%, 18%, and 28%.

As per an RBI study, the weighted average tax rate under the GST had come down to 11.6%, from 14.4% at the time of its launch as against the revenue-neutral rate (RNR) of 15.5%. Sources said the weighted average rate has even come down further to below 11%. However, some experts have pointed out that the RNR of the GST base was actually lower and there is no need to follow the 15.5% rate. They cite the current buoyancy in tax collections.

As the proceeds from the GST compensation cess will be enough to repay loans, taken to compensate states in the past, ahead of the scheduled time (March 2026), sources said the Council will discuss the way forward on these cesses.