Government has tasked a group of ministers (GoM) headed by Chief Minister of Karnataka, Basavaraj S. Bommai to propose a rationalisation of tax rates and consider the merger of different tax slabs within two months.

• With the move, the government seeks to set the stage for an overhaul of the multiple tax rates under the Goods and Services Tax regime.
• Presently, the GST regime has five broad tax rate slabs viz., zero, 5%, 12%, 18% and 28%.
• Apart from that, a cess is levied over and above the 28% rate on some goods and special rates are decided for items like precious stones and diamonds.

Finance Minister Nirmala Sitharaman had announced, after a GST Council meeting on September 17, to set up two GoMs to shore up revenues. One of the panels was to look at tax rate rationalisation issues in order to correct anomalies. During the meeting, finance minister had indicated that the effective tax rate under the GST had decreased from original revenue neutral rate of 15.5% to 11.6%. The rate was decreased because of multiple rate cuts since the introduction of GST in July 2017.

A seven-member group was constituted by the Finance Ministry on September 24. The group is headed by Basavaraj S. Bommai and it includes West Bengal Finance Minister of West Bengal Amit Mitra and Finance Minister of Kerala K.N. Balagopal besides the GST Council members from Goa, Uttar Pradesh, Bihar and Rajasthan. Group has been asked to recommend immediate changes and a roadmap for short term and medium term changes in GST rate structure.

By: Brijesh Kumar