The GST Council may soon consider a plan to rationalise the goods and services tax rates, reducing them from four to three by eliminating the 12 per cent tax slab, according to a report by the Hindustan Times, citing people aware of the development.
The officials and experts advising the Group of Ministers (GoM) over rate rationalisation have reached a “near consensus” that the current 12 per cent tax slab does not hold much relevance now and the items falling under this could be shifted to either 5 per cent or 18 per cent slab.
“This could be the most plausible way to undertake a revenue neutral tax rate rationalisation exercise. However, the GST Council has to take a final call,” the report quoted a person aware of the development.
The proposal to remove 12 per cent tax slab has been supported by most Union and state government officials, experts and GoM representatives, it said.
GST tax slabs
Presently, there are four tax slabs under the GST regime in India – 5 per cent, 12 per cent, 18 per cent and 28 per cent.
Items under 12 per cent tax slab
Under the 12 per cent tax slabs goods such as such as condensed milk, caviar and caviar substitutes prepared from fish eggs, drinking water packed in 20 litre bottles, walkie talkies, tanks and other armoured fighting vehicles, contact lenses, cheese, dates and dried fruits, frozen vegetables, sausages and similar meat products, pasta, jams and jellies, fruit juice-based drinks, namkeens including bhujiya, curry paste, mayonnaise, tooth powder, feeding bottles, carpets, umbrellas, caps, bicycles, specific household utensils, furniture made of cane or wood, pencils and crayons, handbags and shopping bags made of jute or cotton, footwear priced lower than ₹1,000, diagnostic kits, and marble and granite blocks are currently included.
Meanwhile services such as specified construction work, hotel rooms up to ₹7,500 per day, transport of passengers by air in non- economy classes, some types of multimodal transportation, and certain professional, technical and business services are included in the 12 per cent tax slab.
GST Council meeting
The GST Council is expected to meet either in June or July. The apex decision-making body under the indirect tax regime comprises the Union Finance Minister and Finance Ministers (or senior ministers) of states. The Council last met in December 2024 and is expected to discuss proposals related to rate rationalisation and other issues, including the ease of compliance, the report said.
The GoM on rate rationalisation was formed on September 24, 2021, after the decision of the 45th GST Council meeting in Lucknow. Its first convenor was convener was former Karnataka CM Basavaraj S Bommai. In November 2023, it was convened by UP Finance Minister Suresh Kumar Khanna. Subsequently, on February 27, 2024, Samrat Chaudhary, the deputy CM of Bihar, took on the role of convener.
