12% GST slab may be scrapped: What will become cheaper?
What's the story
The Goods and Services Tax (GST) Council is likely to consider a proposal to scrap the 12% tax slab. This would reduce the number of GST slabs from four to three.
The move, aimed at simplifying the current tax structure, is likely to be discussed in an upcoming meeting of the council.
The meeting is expected to take place in late June or July, ahead of Parliament's monsoon session.
Revenue boost
India has 4 main tax slabs under GST regime
The decision to consider this proposal comes as GST collections have crossed ₹2 lakh crore. This has given the council confidence to think about trimming slabs.
Currently, India has four main tax slabs under the GST regime: 5%, 12%, 18%, and 28%. There's also a separate 3% GST on jewelry items.
Tax shift
Proposal to scrap 12% slab receives support from officials
The proposal to scrap the 12% slab has received support from most Union and state government officials, experts, and Group of Ministers (GoM) representatives.
Items currently under this slab could be moved to either the 5% or 18% tax bracket.
Some officials have suggested that mass consumption items should be moved to the lower 5% tax bracket for affordability.
Current tax
Items under the 12% GST slab
The 12% GST slab currently covers a wide range of goods and services.
These include processed and packaged foods, dried fruits, beverages, household items like umbrellas and certain furniture, stationery items like pencils and crayons as well as footwear priced below ₹1,000.
It also covers diagnostic kits for medical purposes as well as construction materials like marble blocks.
Service tax
What will happen to items under this slab?
The 12% GST slab also covers hotel rooms costing up to ₹7,500 per day and air transport of passengers in non-economy classes.
Certain construction work, multimodal transportation services, and professional/technical/business services are also taxed at this rate.
The final decision on which items will be moved to the 5% or 18% tax bracket will be taken after considering a report from GoM on rate rationalization.