Rationalisation of Goods & Services Taxes (GST) likely to be put off for post general election i.e., 2024.

“GST rates are critical not just from inflation point of view, but also it is highly politically sensitive issue. We may see complete overhaul of GST rates once Lok Sabha election got over in 2024,” a senior Government official told businessline. Retail inflation based on Consumer Price Index (CPI) has been above the upper tolerance level of targeted range of 2-6 per cent and likely to stay for some more time. while median rate of 4 per cent is remote possibility.

A Group of Ministers, under the convenorship of Chief Minister of Karnataka Basavaraj Somappa Bommai, is going through rate rejig exercise. The Committee did give an interim report, post which Council recommended some rate change in June such as pre-packaged - pre-labelled items beside others. However, final report awaited.

Commenting on the latest development, MS Mani, Partner with Deloitte, said that while rate rationalisation is the desired objective from a policy standpoint, the timing of the same needs to be carefully calibrated.

Saket Patawari, Executive Director with Nexdigm, says the rate rationalisation could have political repercussion since it would mean items which were considered to be a necessity and therefore attracted lower GST rate, would see a rise in rate of GST. With the general elections of the country just around the corner, “we might see a deferral in this decision as any rate change now could prove to be disruptive for the government.”

Vivek Jalan, Partner with Tax Connect Advisory, says multiple rate changes since the introduction of the GST have brought the effective GST rate to around 12 per cent from the original revenue neutral rate of 15.5 per cent. If the GST rate structure prevailing at its onset in July 2017 is restored, it is expected that there might be an increase in GST collections by another ₹3-lakh crore annually.

3-rate structure

“The GoM on GST Council may consider a three-rate structure by adopting 8, 15 and 30 per cent for revenue neutrality. However, this would also lead to inflation which combined with a global recession expected in the coming year could be detrimental to the country’s growth engine - something which the government may not want to risk in an election year,” Jalan said. Mani also feels there needs to be a clear process of stakeholder consultation, especially for those where the rates may move up,

“With the general elections just around the corner, we might see a deferral in this decision as any rate change now could prove to be disruptive for the government,” Patwari concluded.


- Over 1,200 goods and services except those in negative list attract GST.

- Four primary GST rates: 5, 12,18 and 28 per cent. Some special rates such as 0.25 per cent, 1.5 and 3 per cent. Some of items are in NIL rates.

- 28 per cent slab in GST contributes 16 per cent to the gross GST revenue, while the major chunk of 65 per cent comes from the 18 per cent slab.

- The slabs of 5 per cent and 12 per cent contribute 10 per cent and 8 per cent of the total gross GST revenue, respectively.