GST Council May Scrap 12% Tax Slab: Will Items Like Condensed Milk, Dry Fruits, Bags Get Cheaper or Costlier?

The Central government is reportedly planning to introduce a simplified three-rate structure under the Goods and Services Tax (GST) regime. According to a CNBC-TV18 report citing sources familiar with the matter, this proposal is expected to be discussed at the upcoming GST Council meeting.

The key aspect of the proposal is the elimination of the 12% GST slab. This would streamline the existing four-rate system, currently comprising 5%, 12%, 18%, and 28% into a more straightforward three-tier structure. The change is aimed at reducing complexity and improving compliance.

The Centre is likely to suggest moving essential and widely used items from the current 12% GST slab to the lower 5% rate, while goods and services considered less sensitive may be moved up to the 18% slab.

"Having this discussion now in front of the council makes sense as it keeps the revenue-neutrality intact and move ahead with the much aimed tax rationalisation.............Officials have been weighing this option and they feel that the 12% rate has lost its utility and simplification is the need of the hour," the news report quoted a source aware of the development.

Items Under 12 Percent GST Tax Slab

Here is the list of items currently under the 12% GST slab, relisted for clarity:

• Condensed milk
• Caviar and caviar substitutes prepared from fish eggs
• Drinking water packed in 20-litre bottles
• Walkie talkies
• Tanks and other armoured fighting vehicles
• Contact lenses
• Cheese
• Dates and dried fruits
• Frozen vegetables
• Sausages and similar meat products
• Pasta
• Jams and jellies
• Fruit juice-based drinks
• Namkeens including bhujiya
• Curry paste
• Mayonnaise
• Tooth powder
• Feeding bottles
• Carpets
• Umbrellas
• Caps
• Bicycles
• Specific household utensils
• Furniture made of cane or wood
• Pencils and crayons
• Handbags and shopping bags made of jute or cotton
• Footwear priced below Rs 1,000
• Diagnostic kits
• Marble and granite blocks

Services currently included in the 12% GST slab:

• Specified construction work
• Hotel rooms priced up to Rs 7,500 per day
• Transport of passengers by air in non-economy classes
• Some types of multimodal transportation
• Certain professional services
• Certain technical services
• Certain business services

The report suggested that the GST Council is likely to meet either by the end of June or in early July. Apart from the rate restructuring, the Council is also expected to deliberate on various other reforms, including procedural simplifications and discussions related to the compensation cess.

The proposal to simplify GST rates is still being discussed and needs unanimous approval from the GST Council, which includes both Union and state finance ministers. Decisions on GST require collective agreement, as the Centre cannot act alone.

However, the GST Council has discussed removing the 12% slab according to the report but has not officially recommended it yet. Though the idea has been debated multiple times, no decision has been made to shift from four GST slabs to three.

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