Centre proposes reducing GST slabs from 4 to 2, may retain 5%, 18%
Goods and Services Tax (GST) be retained – 5 per cent and 18 percent – as per sources.
Under this proposal, 90 per cent of the items in the 28 per cent will be moved to the 18 per cent slab, while 99 per cent of the items in the 12 per cent slab will be moved to the five per cent slab, the sources added.
A special 40 per cent rate will apply to luxury and sin goods, which include tobacco, gutkha and cigarettes. The 40 per cent category will have just 5-7 items, according to the government sources, but will exclude aspirational items like refrigerator, air conditioner and washing machine. Further, petroleum products will continue to remain outside the GST regime even in revamped indirect tax structure.
High labour-intensive and export-oriented sectors like diamonds and precious stones would continue to be taxed as per the existing rates.
The total incidence of taxation will remain at the current level of 88 per cent. Sources said that the proposed GST revamp is expected to give consumption a big boost, which will offset revenue loss due to rate rationalisation.
The proposal was based on Union Finance Ministry data that stated that 67 per cent of the total GST revenue comes from products in the 18 per cent Slab, while 11, five and seven per cent come from the 28 per cent, 12 per cent and five per cent slabs respectively.