The six-member Group of Ministers (GoM) on GST rate rationalization, chaired by Bihar Deputy Chief Minister Samrat Chaudhary, is set to convene in Goa on September 25, 2024. The GoM will explore potential revisions to GST slabs, including the highly debated merger of the 12% and 18% tax rates. The meeting comes in the wake of the GoM's last status report, submitted to the GST Council earlier this month.
At the moment, there are four main GST tax bands: 5%, 12%, 18%, and 28%, with most basic items being either GST-free or sold at minimal rates; luxury as well as sin goods are subject to the highest band with an extra cess. However, concerns have been raised by several states, including West Bengal and Karnataka, regarding the impact of any changes on the current GST structure, which they claim has now largely stabilized.
Chandrima Bhattacharya, the Finance Minister in West Bengal, has been in favor of not altering the GST slab structure as it is already in place. Similar sentiments have been expressed by Karnataka Revenue Minister, Krishna Byre Gowda, who has postulated that there is a necessity for proper assessment of the issue and wondered whether one really wants to 'disturb' the current tax system.
What is at the root of the controversy is the fact that the apparent average GST rate has come down to approximately 12%, which means that the tax burden is bracketed well below the effective revenue-neutral rate of 15.3%. This dip has triggered the current debates on rate rationalization to enhance the recovery of revenues without putting undue exertion on businesses or consumers. The fitment committee formed by the central and state tax officers has been undergoing the examination of the consequences that may arise from alterations in the rates, as well as amassing extra information for consideration by the GoM.
Besides the rate rationalization talks, the GST Council constitutes a new GoM on September 9, 2024, for lowering GST rates for medical health insurance. The study outcomes are expected to be unveiled by the end of October, while the final decision may take place in November.
As important decisions on fiscal policies are to come to a decision in the coming days after the GoM meeting held in Goa, further reforms on the Indian GST structure are expected in the coming days as the country continues the quest for its ideal structure of taxes for steady growth.
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