GST Council May Replace 5% GST on Slabs With 8% To Raise Revenue

GST Council - Summary

This move is proposed so that the states do not have to depend on the centre for compensation. Increasing the GST percentage will help them in raising revenue on the goods. The proposal includes moving some goods of mass consumption to 3% and the remaining ones to 8% categories. Currently, GST levies taxes in a specific four-tier percentage category. These are 5%, 12%, 18% and 28%. Out of all these goods, gold and gold jewellery attract 3 per cent of tax.

Not all goods attract GST taxes. There are some goods such as unbranded and unpackaged food items that do not attract any sort of GST taxes.

Key Propositions that are Proposed in the Proposal

There are the following propositions are proposed in the proposal which will be presented in the next meeting of the GST council. These are given below:-

• The council is in favour to move some of the non-food items that currently do not attract any sort of GST tax into 3 per cent of the tax slab.
• According to some sources, there are some proposals and ideas to raise the 5 per cent tax slab to either 7 or 8 or 9 per cent tax slab. But this decision is not final. They are still pondering over this idea. The final decision will be taken by the GST council in their next meeting which comprises finance ministers of both the centre and states.
• According to the estimated approximate calculations, it is expected that every 1 per cent increase in the 5 per cent slab on food items would roughly yield additional revenue of 50,000 crores annually. It’s a huge amount.
• Apparently, the council may finally settle for increasing the GST tax slab from 5 per cent to 8 per cent for most of the items.
• Most of the time essential items are either exempted from GST tax or are taxed at the lowest rate possible because of their necessity and huge demand in day to day life.

Conclusion

States want to become self-sufficient by not asking the centre for compensation to raise their revenue. It is implied that the states do not want to depend on the centre for bridging the gap in GST collection. Over the years, the GST council has succumbed to the demands of the trade and lower GST rates. Increasing tax rates now seems like the only possible way for the GST council to raise revenue without asking the centre for compensation.