Report: GST council likely to do away with 5% slab; move items to 3%, 8% rates

With most states on board to raise revenue so that they do not have to depend on the Centre for compensation, the Goods and Services Tax Council (GST) Council, in its upcoming meeting next month, is likely to take up a proposal to do away with the 5 per cent slab by moving.

Some goods of mass consumption in the 5 per cent slabs would likely be moved to the 3 per cent category and the remaining to 8 per cent, news agency PTI reported quoting sources.

At present, GST has four slabs of 5, 12, 18 and 28 per cent. Besides, gold and gold jewellery attract a 3 per cent tax. There is also an exempt list of items like unbranded and unpacked food items which do not attract the levy.

They further stated that discussions are also on to raise the 5 per cent slab to either 7 or 8 or 9 per cent, however, the final call will be taken by the GST Council which comprises finance ministers of both Centre and states.

As per calculations, every 1 per cent increase in the 5 per cent slab, which mainly includes packaged food items, would roughly yield additional revenue of Rs 50,000 crore annually. Although various options are under consideration, the Council is likely to settle for an 8 per cent GST for most items that currently attract a 5 per cent levy.

Under GST, essential items are either exempted or taxed at the lowest rate while luxury and demerit items attract the highest tax. Luxury and sin goods also attract cess on top of the highest 28 per cent slab. This cess collection is used to compensate states for the revenue loss due to the GST rollout.