The GST council is likely to decrease the four tax slabs to three. The current tax margins, 5%, 12%, 18%, and 28%, will be changed to 8%, 18%, and 28%. According to sources, the council is hoping to increase tax revenue by increasing applied taxes on good and services mainly used by the wealthy classes, reported the Hindustan Times.
The increased taxes will be applied to mobile phones, air travel, air-conditioned train travel, cruise, paintings, pizzas, multi-facility private hospital rooms and fabrics like silk and linen. The move is aimed at improving the sagging Goods and Services Tax (GST) revenues.
The sources told Hindustan Times, “Most of the above-mentioned items are not consumed by the common man, hence, tax rates of either 5% or 12% on these items are not justified. Some stakeholders [state governments] have proposed raising tax rates on these items to either 8% or 18% to augment GST revenue.”
The source also added that the government is looking at simplifying the taxing system by reducing the four slabs to three.
The GST Council scheduled to meet on the 18th of December will discuss matters to address the falling revenues and ensure that the centre compensates the states on time.
Finance Minister Nirmala Sitharaman had earlier said that the revenue system had become distorted due to the changes that came soon after GST was applied. At the Hindustan Times Summit, Sitharaman said, “I am not saying that people did it thoughtlessly, but in the enthusiasm to reduce taxes, that framework which was originally agreed at Stage One of GST was distorted”, reported Hindustan Times.