The Goods and Services Tax (GST) Council is reportedly considering a reduction in tax rates on select items to stimulate consumption while maintaining revenue stability, according to a report citing sources familiar with the discussions.
Proposal to Eliminate 12% GST Slab
One of the key proposals under consideration is scrapping the 12% tax slab and shifting items either to the 5% or 18% categories. This move aims to simplify the tax structure and provide a much-needed boost to consumption, a senior official reported on the condition of anonymity.
The matter has been placed before a ministerial panel led by Bihar Deputy Chief Minister Samrat Chaudhary. The panel is evaluating possible tax adjustments that could balance rate reductions with revenue considerations.
GST Rationalization Efforts
The GST Council had set up the Chaudhary-led ministerial panel in September 2021 to address tax anomalies, resolve classification disputes, and optimize tax rates. While initial efforts focused on revenue enhancement, there is now an increasing push to drive consumption through targeted tax cuts.
As per data from the Central Board of Indirect Taxes and Customs (CBIC), as of April 2023:
- Over 600 items were taxed at 18%
- Around 275 items fell under the 12% slab
- Nearly 280 items were taxed at 5%
- Less than 50 items were in the highest 28% category
GST Collection Trends and Policy Recommendations
GST collections reached a nine-month high of ₹1.71 trillion in January 2025, marking a 10.9% year-on-year increase. The highest-ever monthly collection stood at ₹1.92 trillion in April FY25.
The Fifteenth Finance Commission, led by N.K. Singh, had previously suggested transitioning from the current four-rate GST structure (5%, 12%, 18%, and 28%) to a three-tier system. The proposal cited potential revenue implications from previous rate reductions.
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