GoM Defers GST Slab Changes, Focuses on Rate Review Across Sectors

Introduction

The Group of Ministers (GoM) on GST rate rationalisation, led by Bihar Deputy Chief Minister Samrat Chaudhary, has postponed plans to restructure the tax slabs but is actively reviewing GST rates across various categories. With significant attention on items in the 12% and 18% brackets, the GoM is expected to make crucial decisions regarding specific products and services by the end of September 2024.

Review of Tax Brackets

Sources indicate that the GoM is focusing on sectors like health insurance, restaurants, and potentially certain food products, where differing GST rates apply to branded, packed goods versus unpacked ones. Items such as namkeens may also be under consideration for rate adjustments. While the 12% bracket includes many goods, it contributes little revenue compared to the 18% bracket, which accounts for 73% of GST collections. A slight reduction in the 18% rate could significantly impact overall revenue.

Political Considerations

Given the current political climate, increasing levies on items within the 12% bracket is considered challenging. As a result, the GoM is leaning towards keeping the slabs unchanged. This decision is expected to be presented to the GST Council in its upcoming meeting on September 9, 2024. However, other rate changes, particularly those focused on specific goods and services, will be finalized over the coming weeks.

Sector-Specific Concerns

The online gaming industry, which faces a 28% GST levy, has lobbied for a rate review. However, immediate changes appear unlikely due to concerns from both the Centre and several states about the social impact of gaming-related losses. Similarly, the beverage industry's demands are tied to broader discussions about the future of compensation cess.

Industry Feedback

Industry stakeholders have urged the GoM to limit rate changes to twice a year to minimize disruptions for vendors who may struggle with the impact of frequent tax adjustments after goods and services have been supplied.

Conclusion

As the GoM continues its review, businesses and consumers alike are keenly awaiting the outcomes of these deliberations. The decisions made by the GST Council in the coming weeks could have significant implications for various sectors, particularly those currently subject to the 12% and 18% tax brackets.