Fact Check: Is Centre planning to raise GST tax slab?

New Delhi, Apr 19: The Central government has denied reports of GST council planning to raise 5 per cent tax slab to 8 per cent. The reaction comes amid media reports claimed that the GST council was planning to do away with the 5 per cent tax slab and replace it with 3 per cent and 8 per cent.

"There is no such proposal from the council, reports are speculative with no truth," Central government sources told ANI.

A group comprising ministers from states is yet to finalise a report on rationalisation of GST rates and a decision will be taken in due course, sources said.

As the GST Council looks to raise revenues and do away with states' dependence on the Centre for compensation, the tax body in its next meeting may look at raising the lowest tax slab to 8 percent from the current 5 percent, reports said.

According to the report, the GoM is likely to propose raising the 5 percent slab to 8 percent, which may yield an additional Rs 1.50 lakh crore annual revenues. As per calculations, a 1 percent increase in the lowest slab, which mainly includes packaged food items, results in a revenue gain of Rs 50,000 crore annually.

Essential items are either exempted or taxed at the lowest tax slab, while luxury and sin items attract the highest slab. Luxury and sin products attract cess on top of the highest 28 percent slab. This cess is collected to reimburse states for revenue losses caused by the implementation of the GST.

As part of rationalization, the GoM is also looking at a 3-tier GST structure, with rates at 8, 18, and 28 percent. As per the report, the GoM might also propose reducing the number of items that are exempted from GST.

Currently, the GST is a four-tiered framework with tax rates of 5, 12, 18, and 28 percent.

The date of the next meeting of the GST council is yet to be confirmed as the Union Finance Minister Nirmala Sitharaman, who is also the Chairman of the GST Council, is currently in the USA to attend the Spring Meetings organised by the International Monetary Fund and World Bank, G20 meetings besides other associated investment meetings as part of her official visit to the USA beginning April 18, 2022.