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Soon, A Merger Of 12% and 18% GST Rate Slabs

The government, in an attempt to simplify the Goods and Services Taxes (GST) regime in the country, is planning to lower the number of tax slabs in the upcoming meeting in mid-March, reports Times Now.

The Centre government will likely ask the states to look at merging 12 per cent and 18 per cent tax slabs into a standard rate

“The next GST Council meeting will take place in March. We will discuss with the council members and try to take up the issue of slab merger and correction of inverted duty structure in the meeting,” said a senior central board of indirect taxes and customs official.
Sources – Business today

The opposition, as it is their job, has over the years criticised the Modi administration for a complicated GST structures that, as of now, has four slabs – 5 per cent, 12 per cent, 18 per cent and 28 per cent. In addition, the government also charges cess of luxury products that are usally placed in the 28 per cent slab.

The plan to merge the tax slabs has been recommended by the 15th finance commission. The 15th Finance Commission chaired by N K Singh has also suggested rationalization of GST into a three-rate structure, comprising a 5 per cent merit rate and 28-30 per cent de-merit rate.

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As per the recommendation by the commission, the effective tax rate under GST stands at 11.8 per cent as per the International Monetary Fund and 11.6 per cent as per the Reserve Bank of India. This rate is lesser than 14 per cent, that is the average revenue-neutral rate (RNR) that was required for a smooth transition from the value-added tax regime without any revenue loss. 

“We realize that our GST rates are lower than the revenue-neutral rate. The Council will take a final call on what the rationalized slabs should be. The aim will be to make the structure clean besides improving revenues.,” said the senior official. 

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GST revenue for the goverenemnt for some months now has remained good. The collection was Rs 1.19 lakh crore for the month of January and Rs 1.15 lakh crore in December with the revival fo economic activities post lockdown.

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