GST Council: Ministers’ panel yet to decide on 5% rate rise

A group of ministers tasked by the Goods and Services Tax Council to look into rate rationalisation is yet to take a view on the issue.

It was earlier notified that the seven-member panel, which is led by Karnataka Chief Minister Basavaraj S Bommai and includes finance ministers from West Bengal, Kerala, Goa, Bihar, Uttar Pradesh and Rajasthan as members, is likely to meet early next month. The group has not taken up a proposal to raise the lowest or threshold slab under GST to 8% from 5%, a source said.

Any recommendation of the panel would be placed before the GST Council, headed by Union Finance Minister Nirmala Sitharaman and including representatives of all states and Union Territories, for a final decision. No dates for the meeting have so far been announced but it is likely to meet in the second half of May.

With the inflation rate spiking in recent months, policymakers will take a hard look at any change in GST rates lest it fuels price rise, the source said. The GST has a four-tier structure, consisting of 5%, 12%, 18% and 28% rates.

In addition to this, there are special rates for some goods such as precious metals. There was a thought in some quarters that the slab of 5% may be broken into 3% and 8%, levying the lower tax rate on essential items.

However, no view on rate rationalisation has yet been taken by the GoM, let alone the GST Council, the source said. The call on tinkering with the rates is a political decision and the same will weigh when the GST Council takes a view on it, the source said.

The GST Council –the highest decision-making body that was set up after more than a dozen central and state taxes such as excise duty and VAT were subsumed into a uniform nationwide levy – had set up the GoM on rate rationalisation at its September 2021 meeting in Lucknow. The group was asked to review the exempt goods to expand the tax base, suggest changes to simplify the rate structure and garner the required resources.