A senior official from the Finance Ministry has disclosed that any substantial changes in the Goods and Services Tax (GST) rates are likely to be postponed until after the upcoming Lok Sabha elections. This announcement comes amidst ongoing discussions regarding potential rate adjustments within the GST framework.
Post-Election Considerations
According to the official, while minor modifications can occur based on the recommendations of the GST Council, significant changes are anticipated only after the conclusion of the general elections. The next Council meeting, slated to occur either late this month or early next month, is expected to be the final one before the elections, although the official mentioned that the date hasn't been finalized yet.
Current GST Structure
As of now, GST is levied on over 1,200 goods and services, with primary rates set at 5%, 12%, 18%, and 28%. Various items also fall under special rates, including those at 0.25%, 1.5%, and 3%, with some goods taxed at nil rates. Notably, the 28% slab contributes 16% to the gross GST revenue, while the 18% slab accounts for the largest share at 65%.
Analysis of GST Impact
A recent White Paper from the government highlighted that the average indirect tax rate pre-GST was 15%, compared to 12.2% under the GST regime as of March 2023. The paper also underscored significant savings for households and an increase in monthly GST revenue from ₹90,000 crore in FY18 to ₹1.7 lakh crore in FY24.
Ongoing Rate Rejig Discussions
There's been persistent demand to reevaluate GST rates, particularly merging the 12% and 15% slabs and addressing the inverted duty structure. Suggestions have included raising the 5% slab to 8%. However, the official stressed that decisions on these matters are politically sensitive and likely to be deferred until after the elections.
Group of Ministers' Role
A Group of Ministers, chaired by the Finance Minister of Uttar Pradesh, Suresh Kumar Khanna, is currently conducting a review of GST rates. While interim recommendations have been made previously, the final report is pending. Additionally, the group requires restructuring due to changes in political dynamics, including the replacement of a member from Bihar.
Conclusion
The delay in GST rate rationalization until after the Lok Sabha elections reflects the sensitivity of the issue and the need for political clarity. Despite ongoing discussions and interim recommendations, significant changes are expected to be deferred until post-election, underscoring the complex interplay between economic policy and political considerations.
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