Finance and Preveiment Minister Nirmala Sitharaman is expected to meet the Group of Ministers (GoM) on GST rate rationalisation in April after the Budget session in order to break the impasse on the proposal to eliminate the 12% GST slab. The Centre has also been pushing for a simplified tax structure but the state ministers have failed to reach a consensus because of concerns about revenue loss and unequal tax burden.
The six-member GoM, headed by Bihar’s Deputy Chief Minister Samrat Chaudhary, includes ministers from Uttar Pradesh, Rajasthan, Karnataka, West Bengal and Kerala. The Centre is trying to phased out the 12% slab, but some of the states are against it as it may affect some sectors. It is reported that Sitharaman’s involvement in the matter may help in the formation of consensus and vision.
At present, the 12% GST slab makes only 5% of the total GST collections, which is the least of the four primary slabs. At present, the 18 per cent slab leads in collections with a 73 per cent share, the 28 per slab follows with 12.5 per cent, and the 5 per slab stands at 8 per cent. The government wants to move to a three-rate structure — 5 per cent, 18 per cent and 28 per cent — to simplify taxation and avoid disputes.
Economists argue that implementing GST rationalization can increase consumption more than direct tax cuts as indirect taxes on consumption induce spending. As the Centre wants to quicken the reforms, the Finance Minister’s meeting with the GoM will be significant to determine the direction of GST policy in India.
