Govt committee recommends 2 GST slabs instead of 5

The government may consider collapsing the five GST slabs into two and address inverted duty structure distortions in order to simplify the system and combat a shortfall in collections. As per sources, a committee of officials from the Centre and the states on GST revenue augmentation recommends these measures. According to the presentation, there could be a shortfall of Rs 63,200 crore in GST collections in the current financial year and as much as Rs 2 lakh crore by 2021.

The panel suggested two slabs of 10% and 20%. Alternatively, some goods could be moved from the 18% slab back to 28%, the panel said in a presentation to Bihar deputy CM Sushil Modi in Bengaluru. The GST Council had, at its recent meeting, asked Modi to look into revenue augmentation measures. Modi, Bihar finance minister and head of the group of ministers (GoM) on integrated GST (IGST), had ruled out the possibility of changes to the rate structure at a time when revenues have moderated due to the economic slowdown.

“I want to assure you that not a single state… (or) the Union government are ready to raise tax rates,” Modi had said. The panel highlighted the issue with 23 items besides some miscellaneous ones to drive home the point about the need to correct inverted duty structure distortions that mean inputs are taxed at a higher rate than finished products.