Panel Said To Consider Rationalising GST Rate Structure To Three Slabs
The word “Taxes” is seen on the facade of the Internal Revenue Service headquarters in Washington, D.C., U.S. Photographer: Andrew Harrer/Bloomberg

Panel Said To Consider Rationalising GST Rate Structure To Three Slabs

A government panel plans to rationalise the goods and services tax rate structure by merging the 5 percent and 12 percent tax slabs, according to a person privy to the development.

A three-rate GST structure is being explored against the present four-rate structure, the official said, adding the 5 percent and 12 percent slabs could be merged to form an 8 percent slab.

The proposal is being discussed and the idea is to keep the change in GST rates revenue neutral, the official said. The panel was created to augment falling GST revenues, and to suggest measures to prevent misuse as well as expand the tax base.

Out of the 1,216 commodities that find common use, about 183 are taxed at zero rate, 308 at 5 percent, 178 at 12 percent and 517 at 18 percent, former Finance Minister Arun Jaitley wrote on Facebook post last year.

Standardisation of rates should be done with focus in making the regime more inclusive by bringing more sectors within the tax net as is the case globally, said Krishan Arora, a partner at Grant Thornton India LLP.

There should be three GST rates—6 percent, 12 percent, and 18 percent—and the zero and 28 percent slabs should be done away with, Bibek Debroy, chairman of Prime Minister’s Economic Advisory Council, told The Economic Times newspaper.

Jaitley had, however, said an increase in GST revenues will give an opportunity to policymakers to merge the 12 percent and 18 percent slabs, effectively making the GST a two-rate tax.

The merging of rate slabs would result in better tax administration and ease out interpretation and classification issues which was the overall spirit of GST, said Arora. The exercise would need careful analysis of overall product fitment, consumer sentiment and revenue protection, he said.

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