GST Council Plans to Raise The GST Tax Slab From 5% To 8%, Says Report

The Goods and Services Tax (GST) Council in its next meeting might raise the lowest tax slab to 8%, from 5%, according to a report by the PTI news agency, citing sources. As the GST Council looks to raise revenues and do away with states' dependence on the Centre for compensation, the tax body in its next meeting may look at raising the lowest tax slab to 8 percent from the current 5 percent, said sources.

A committee of state finance ministers may present a report to the council by the end of March considering different revenue-raising measures, such as raising the lowest slab and rationalising the slab. Currently, the GST is a four-tiered framework with tax rates of 5, 12, 18, and 28 percent.

Essential items are either exempted or taxed at the lowest tax slab, while luxury and sin items attract the highest slab. Luxury and sin products attract cess on top of the highest 28 percent slab. This cess is collected to reimburse states for revenue losses caused by the implementation of the GST.
According to the report, the GoM is likely to propose raising the 5 percent slab to 8 percent, which may yield an additional Rs 1.50 lakh crore annual revenues. As per calculations, a 1 percent increase in the lowest slab, which mainly includes packaged food items, results in a revenue gain of Rs 50,000 crore annually.

As part of rationalization, the GoM is also looking at a 3-tier GST structure, with rates at 8, 18, and 28 percent. As per the report, the GoM might also propose reducing the number of items that are exempted from GST. Currently, unpackaged and unbranded food and dairy items are exempted from GST.