GST rates of more goods may be re-jigged

A further rationalisation of the rate structure under the Goods and Services Tax is likely although the process would take some time.

Sources said the GST Council would look at reducing tax rates of more items, with the objective of brining more goods to the 12 per cent, five per cent and exempt categories.

“While rates of most goods were higher in the pre-GST era, in the interest of social justice it is necessary to ensure that prices come down,” said a source.

Most States are also understood to have supported the proposal when it was discussed at the GST Council meeting in Guwahati on November 10.

At present, there are four tax slabs under GST for goods — five per cent, 12 per cent, 18 per cent and 28 per cent, apart from nil or exempt items that attract no tax.

Efforts would be to bring more goods under 12 per cent from 18 per cent and the nil tax bracket would also be expanded to include more items from the five per cent category,sources said.

A similar approach may also be taken for services but that would be a more tricky exercise as the standard rate is considered to be 18 per cent.

But the review would take place over time as the revenue implications would also have to be assessed.

To ease the burden on consumers, the GST Council has already reduced the rate of 177 items, leaving just 50 in the top 28 per cent tax bracket.

Additionally, rates of over three dozen goods were also revised downwards.

However, the rate reductions have not come cheap and are expected to cost about ₹20,000 crore to the government annually.

With revenue implications yet to become clear under GST, both the Centre and the States are waiting to see whether the lower taxes and easier compliance norms would help shore up tax collections.

The top 28 per cent tax slab will continue under GST but only on products that attract compensation cess and are considered sin goods like tobacco or luxury items such as SUVs.