GST Council to raise 5% tax slab to 8%

The GST Council might raise the lowest tax slab to 8% from 5%. The agency said that the increase in tax slab may yield an additional Rs 1.50 lakh crore annual revenues.

A panel of state finance ministers is likely to submit its report by this month end to the Council suggesting various steps to raise revenue, including hiking the lowest slab and rationalizing the slab.

Further, the Group of Ministers is looking to create GST a 3-tier structure with revision of rates at 8%, 18%, and 28%, respectively. Presently, GST is a four-tier structure attracting a tax rate of 5%, 12%, 18% and 28%, respectively.

A 1% increase in the lowest slab, which mainly includes packaged food items, results in a revenue gain of Rs 50,000 crore annually. Luxury and sin goods attract cess on top of the highest 28% slab. This cess collection is used to compensate states for the revenue loss due to GST rollout.

If the proposal comes through, all the goods and services which are currently taxed at 12%, will move to an 18% slab. Besides, the ministers are also looking to add more items under the various tax slabs and remove the items exempted from GST.

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