“Finance Ministry Foresees Post-Election GST Rate Changes”

A senior official from the Finance Ministry has indicated that any significant changes to the Goods and Services Tax (GST) rates are likely to occur only after the upcoming Lok Sabha elections. The official mentioned that while minor adjustments may happen based on the recommendations of the GST Council, overall revisions are anticipated post-election.

The GST Council is scheduled to convene either later this month or next month, marking the final meeting before the general election. However, the official clarified that the date for the meeting has yet to be finalized.

Revenue Secretary Sanjay Malhotra previously stated that the GST Council regularly reviews rates and provides recommendations as part of an ongoing process. However, no major proposals for rate adjustments are currently on the table. Malhotra emphasized that decisions regarding rates must be made collectively by the GST Council.

Under the GST regime, over 1,200 goods and services, excluding those on the negative list, are subject to GST. The primary GST rates range from 5% to 28%, with additional special rates and NIL rates for specific items. The 28% slab contributes 16% to the gross GST revenue, while the majority, 65%, comes from the 18% slab. Slabs of 5% and 12% contribute 10% and 8% of the total gross GST revenue, respectively.

According to a White Paper released by the government, the average pre-GST indirect tax rate was 15%, while the current average under GST stands at 12.2% (as of March 2023). The paper also highlighted significant savings for households under GST, amounting to nearly ₹45,000 crore per month from December 2017 to March 2023. Additionally, GST revenue has increased substantially, from ₹90,000 crore in FY18 to ₹1.7 lakh crore in FY24.

There have been persistent calls for a rate rejig, including merging two slabs (12% and 15%) and addressing the inverted duty structure by raising the 5% slab to 8%. However, the official noted that decisions on these matters are politically sensitive and are likely to be addressed post-election, when there is more clarity on the political landscape.

A Group of Ministers, led by the Finance Minister of Uttar Pradesh, Suresh Kumar Khanna, is currently overseeing the rate rejig exercise. While interim recommendations have been made, the final report is pending, necessitating the reconfiguration of the group due to changes in political composition.