With monthly GST collections now averaging over ₹2 lakh crore and state revenues remaining robust, tax experts believe the stage is set for a major structural reform: eliminating the 12% slab and moving towards a three-rate GST system.“The 12% rate, when it was introduced, was intended to be a transitional or intermediary rate. It was never meant to prevail for a very long time. But we are now entering the eighth year of GST, and the rate is still around,” said MS Mani, Partner at Deloitte India, in an interview with CNBC-TV18.
He added that this slab comprises relatively fewer goods than the 5% or 18% categories, making it easier to distribute the items in a revenue-neutral manner.
A CNBC-TV18 report has said that the upcoming GST Council meeting will likely discuss the proposal to reduce the number of GST slabs from four to three by merging the 12% rate into the 5% and 18% bands. The move, experts argue, would significantly ease compliance burdens, especially for MSMEs.“Processed and packaged food, dried and preserved foods, diagnostic kits, and construction materials are among the items taxed at 12% today,” said Saurabh Agarwal, Partner at EY India.He sees potential for many food items to be moved to the 5% slab and also urged consideration of lowering GST on term and health insurance to enhance affordability and boost adoption.MS Mani noted that stable GST collections, which have increased from ₹1.4 lakh crore two years ago to ₹2 lakh crore now, have diminished concerns about revenue loss.“A large part of the revenue goes to states, and their share has grown with the surge in collections,” he pointed out, suggesting that states may now be more open to reforms they were previously reluctant to support.The simplification of GST rates could also resolve long-standing complaints from smaller businesses.“SMEs and MSMEs don’t have in-house tax expertise. An extra slab, like 12%, complicates both input and output tax management. Removing it would streamline compliance,” Mani added.ALSO READ | High GST collections open door for rate rationalisation, say experts(Edited by : Ajay Vaishnav)
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