Govt Plans To Reduce Slabs; Tax To Increase On Goods And Services?


The government is planning to raise the goods and services tax (GST) over the next two years and reduce the number of slabs, according to an FE report quoting sources. This may help the government raise tax collections and reduce inflation which is already at a 17-month high of 6.95 per cent.

The report said that the rate hikes on mass consumption and essential items will be more gradual. There are 480 items under the 18 per cent slab, from which about 70 per cent of the GST collections come. Currently, the GST system has four slabs — 5 per cent, 12 per cent, 18 per cent, and 28 per cent.

The government also plans to reduce the number of GST slabs from the current four to three. The report said a new media slab of 15 per cent may be introduced in place of 12 per cent and 18 per cent slabs. “The 5 per cent rate will be replaced by a new rate which will be 6 per cent or 7 per cent, but the rate tweaking will be done in manner that not more than four slabs are created at any point of time,” the report said.

The highest slab is likely to remain unchanged at 28 per cent. So, there are likely to be three slabs — 6-7 per cent, 15 per cent, and 28 per cent. The GST Council may consider these proposals in the third week of May. Suggestions by a group of ministers (GoM) led by Karnataka Chief Minister Basavaraj Bommai on the GST rate rationalisation will likely be ready by April-end, the report said.

The GST collections in March 2022 hit an all-time high of Rs 1,42,095 crore, driven by economic recovery and anti-evasion drives such as action against fake billers. The previous record GST collection was seen in January this year at Rs 1,40,986 crore.

“The gross GST collection in March 2022 is at all-time high, breaching earlier record of Rs 1,40,986 crore collected in the Month of January 2022,” the finance ministry said in the statement.

The ministry said the gross goods and services tax revenue collected in March 2022 stood at Rs 1,42,095 crore. Of this, Central GST stood at Rs 25,830 crore, State GST was Rs 32,378 crore, Integrated GST was Rs 74,470 crore (including Rs 39,131 crore collected on import of goods). Cess stood at Rs 9,417 crore, including Rs 981 crore collected on import of goods.

According to collections by individual states, Maharashtra saw the most goods and services tax collection at Rs 20,305 crore, followed by Gujarat (Rs 9,158 crore), Karnataka (Rs 8,750 crore), Tamil Nadu (Rs 8,023 crore), Haryana (Rs 6,654 crore) and Uttar Pradesh (Rs 6,620 crore).

In February 2022, the total number of e-way bills generated stood at 6.91 crore compared to the previous month of January (6.88 crore) despite being a shorter month, which indicates the recovery of business activity at a faster pace.

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