The rationalization of Goods and Services Tax ( GST ) rates will possibly occur post the Lok Sabha elections, as indicated by a senior official from the Finance Ministry.
According to the official, minor adjustments may happen based on GST Council recommendations when necessary. However, significant overall changes are anticipated only after the elections. The upcoming Council meeting, likely scheduled for later this month or next month, is expected to be the final one before the general election, though the official has not confirmed the exact date.
In response to inquiries about the rate adjustment exercise, Revenue Secretary Sanjay Malhotra stated that the GST Council regularly reviews rates, and any decision rests with the Council. Currently, there is no substantial proposal for rate changes. It’s important to note that, under GST, rates for most goods and services are lower than the sales tax-VAT regime.
Presently, GST applies to over 1,200 goods and services (excluding those on the negative list). The primary GST rates are 5%, 12%, 18%, and 28%, with special rates of 0.25%, 1.5%, and 3%. Some items fall under NIL rates. The 28% slab contributes 16% to the gross GST revenue, while the majority, 65%, comes from the 18% slab. The 5% and 12% slabs contribute 10% and 8%, respectively.
A recent government White Paper noted that the average pre-GST indirect tax rate was 15%, while under GST, it is 12.2% (as of March 2023). The paper highlighted GST’s positive impact, saving households nearly ₹45,000 crore per month from December 2017 to March 2023. Meanwhile, monthly average GST revenue increased from ₹90,000 crore in FY18 to ₹1.7 lakh crore in FY24.
Despite persistent calls to revise rates, particularly merging the 12% and 15% slabs, and addressing the inverted duty structure, any decision on these matters is politically sensitive. Therefore, recommendations or decisions are expected post-poll, when there is more clarity on the political landscape.
The Group of Ministers (GoM), led by Uttar Pradesh Finance Minister Suresh Kumar Khanna, is currently reassessing rates. While an interim report has been submitted, the final report is pending. The group needs restructuring due to changes in the political composition of the State Government, requiring the replacement of one member, Vijay Kumar Chaudhary, the former Finance Minister of Bihar.
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