5% GST rate may be hiked to 6% as govt looks to increase revenue

In wake of growing revenue concerns, the Goods and Services Tax (GST) council may consider revamping tax structure and raising the existing 5 per cent rate to 6 per cent to shore up the shortfall in collections. The slab restructuring may help government garner additional revenues of Rs 1,000 crore per month.

As of now, the GST has four slabs of 5 per cent, 12 per cent, 18 per cent and 28 per cent. The 5 per cent slab includes essential commodities such as food items, footwear and basic clothing.

According to the government data, the 5 per cent slab contributes to nearly 5 per cent of GST collection. The government's monthly GST collection target is about Rs 1.18 lakh crore.

The GST panel, chaired by the union finance minister and comprising finance ministers of states, will meet on 18 December to examine various measures to boost revenue collection, including review of the tax structure, compensation cess rates and exempted items. According to Business Standard, the GST Council secretariat has sought inputs from states on all these issues at the next meeting.

Also Read: Govt sets up committee to look into GST revenue shortfall

"An idea that has emerged is increasing the 5 per cent slab to 6 per cent, which will mean 3 per cent GST each for the Centre and states. Some states are arguing that this will mean a 20 per cent increase in the tax rate. But in value terms it will not be much," a government official told daily.

In a bid to tackle dwindling GST collections, the government had formed a committee of officers in October this year to suggest measures to boost collections and make businesses comply voluntarily. The committee has commissioners from state GST council of Maharashtra, Tamil Nadu, Uttar Pradesh, West Bengal, Punjab along with Joint Secretary and Executive VP of GST Council.

Also Read: GST revenue crosses Rs 1 lakh crore mark in November

The committee was formed after GST collections fell sharply to a 19-month low of Rs 91,916 crore in September. Tax collections stood at Rs 95,380 crore in October. However, in a little respite, the GST collections crossed Rs 1 lakh crore mark to Rs 1.03 lakh crore in November. After two months of negative growth, GST revenues witnessed a recovery with a positive growth of 6 per cent on the yearly basis during the month under review.

Edited by Chitranjan Kumar