The Goods and Services Tax (GST) Council is now likely to meet in late August after the Monsoon Session of the Parliament ends.
According to sources, there is now a near consensus on removing the 12% GST rate slab, but a final decision will have to be taken by the Council.
“There have been a lot of discussions on rate rationalisation and the finance ministry continues to be in talks with stakeholders. There is now 90% agreement on doing away with the 12% rate,” said sources close to the development.
However, a final call rests with the Council and some states have concerns over potential revenue losses. There are also political consultations at a high level underway to get parties on board, sources indicated.
As per calculations, there are very few items in the 12% slab. The thinking is that most items of common use will be moved to the 5% slab, while more expensive and branded items could be moved to the 18% rate.
A range of items such as butter, ghee, processed foods, mobile phones and umbrellas currently attract 12% GST.
“It will be a marginal difference in tax and can also be absorbed by manufacturers,” sources noted, adding that this can give an impetus to consumption as well, which would lead to higher sales and subsequently higher tax revenue.
“Despite the cuts in income tax, the tax collections have actually risen,” they pointed out.
The input tax credit for these items will continue to be given even if they move to the 5% rate.
Meanwhile, discussions are also underway on the future of the compensation cess that is set to end on March 31, 2026. The cess is likely to continue, but in a different form, which is likely to be levied on sin goods such as alcohol.
At present, GST has a five-rate structure of 0%, 5%, 12%, 18%, 28% and a cess on sin goods and high-end items.
With GST completing eight years now, there has been a call for rationalisation of the tax rates under the indirect tax levy.
The Monsoon Session of Parliament is set to commence on July 21 and will adjourn on August 21. States, too, will have their respective assembly sessions, and it is often difficult to find a convenient time for the Council to meet during such periods. The GST Council last met in December 2024 in Jaisalmer, is now likely to hold its meeting in New Delhi.
