GST Council may adopt a three-tier structure by removing 5% tax slab

Currently, GST is a four-tier structure of 5, 12, 18 and 28 percent with a 3% tax on gold and gold jewelry.

GST ने बदला टैक्स सिस्टम, सबको मिली राहत

NewDelhi: GST (Goods and Services Tax) Council is mulling the idea of doing away with the 5% tax slab in its upcoming council meeting the next month. With most states on board to raise revenue so that they do not have to depend on the Centre for compensation; after the revenue sharing regime coming to end in GST, In its next meeting the GST Council is likely to consider a proposal to remove the 5% tax slab by moving some goods of mass consumption to 3% and the remaining to 8% categories, sources said.

Right now, GST is a four-tier tax structure of 5, 12, 18 and 28 percent. Besides, gold and gold jewellery attract 3% tax. In addition to this, there is a long list of exempted items like unbranded and unpacked food items which do not attract the tax.

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As per the sources in order to increase revenue, the Council may decide to reduce the list of exempt items by moving some of the non-food items to 3% slab. Discussions are on to raise the 5% tax slab to either 7 or 8 or 9%, a final call will be taken under the meeting of GST Council, which constitutes finance ministers of both Centre and states.

As per the estimates, every 1% increase in the 5% slab, which mainly includes packaged food items, would roughly yield additional revenue of Rs 50,000 crore annually. Although various options are under consideration, the Council is likely to settle for less than 8% GST tax for most items that currently come under 5% slab.

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Under GST, essential items are either exempted or taxed at the lowest rate while luxury, sin and demerit items attract the highest tax. Luxury and sin goods even attract an additional cess on top of the highest 28% tax slab. This cess collected by HST council is used to compensate states for their revenue loss due to the GST rollout.

While the GST compensation regime is going to end in June, it is imperative that states become self-sufficient and not depend on the Centre Govt for bridging the revenue gap in GST collection.


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At the time of GST implementation on July 1, 2017, the Centre had agreed to compensate states for the next 5 years till June 2022 and protect their revenue at 14% annually over the base year revenue of 2015-16.

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