Two GST Rate Slabs Possible in the Future

The Government of India (GoI) implemented GST in India from the 1st of July 2017 through the Ministry of Finance. GST has integrated many of the indirect taxes into one single regime and simplified compliance requirements. In many countries, GST is levied in a single or dual rate structure. However, in India, GST is levied under five slabs for services and under seven slab rates for goods. The GST rate for goods fall under the rates of 0%, 0.25%, 5%, 12%, 18% and 28%. The

GST rate for services falls under the rates of 0%, 5%, 12%, 18% and 28%. The Government has now begun considering a plan to further streamline GST and introduce a single rate of 18% or dual slab rates of 12% and 18% in the future.

Requests for GST Rate Reductions

With good tax collections in the month of August and September, the Industry has started requesting the Government for a reduction in the GST rates. At the GST Council meeting held recently, the Central Government was requested by multiple states to reduce the GST rate for many of the goods and services in the top 28% GST rate bracket. The Centre agreed with some of the suggestions and reduced the GST rate for nearly 40 goods and services. However, the Central Government, for now, has advised the State Governments that they should let the prices stabilise and allow the input tax credit to flow seamlessly, before requesting any further reduction in GST rates. After the prices stabilise, the Government is expected to move to a four-slab GST structure with two standard rates of 12% and 18%.

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GST Rate in Other Countries

With 7 rate slabs and the highest slab of 28%, GST is more complicated in India than other countries. For example, in Canada, GST is applicable in only two slabs namely 5% and 0%. In the United Kingdom, the standard GST rate applies at 20%, while the government fixed the GST rate of some goods at 5% and 0%. Similarly, in France, the standard GST rate for goods and services applies at 20% and the government fixed the GST rate of some goods at 5.5% and 2.1%. In China, the standard GST rate is 17% while some goods and services are taxed at 13%, 11%, 6%, 5% and 3%.

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Frequently Asked Questions

Common questions about GST Rate Slabs in India: Future Changes & Implications.

GST (Goods and Services Tax) is a unified indirect tax system that integrated many of the indirect taxes into one single regime and simplified compliance requirements. GST was implemented in India from the 1st of July 2017 through the Ministry of Finance.

Currently, GST is levied under five slabs for services (0%, 5%, 12%, 18%, and 28%) and under seven slab rates for goods (0%, 0.25%, 5%, 12%, 18%, and 28%).

The Government of India is considering a plan to streamline GST and introduce either a single rate of 18% or dual slab rates of 12% and 18% in the future.

With good tax collections in recent months, industries have started requesting the Government for a reduction in the GST rates, particularly for goods and services in the top 28% GST rate bracket.

With 7 rate slabs and the highest slab of 28%, GST is more complicated in India than other countries like Canada (2 slabs), the United Kingdom (3 slabs), France (3 slabs), and China (5 slabs).

The Central Government has advised the State Governments to let the prices stabilize and allow the input tax credit to flow seamlessly before requesting further reductions in GST rates.

In Canada, GST is applicable at 5% and 0%. In the United Kingdom, the standard GST rate is 20%, with some goods taxed at 5% and 0%. In France, the standard GST rate is 20%, with some goods taxed at 5.5% and 2.1%. In China, the standard GST rate is 17%, with some goods and services taxed at 13%, 11%, 6%, 5%, and 3%.

The article does not provide a specific timeline for the proposed changes to the GST rate structure in India. However, it mentions that after prices stabilize, the Government is expected to move to a four-slab GST structure with two standard rates of 12% and 18%.

The current GST rate structure with multiple slabs and a high top rate of 28% can be complicated for businesses to comply with and may contribute to higher prices for consumers.

A simplified GST rate structure with fewer slabs, such as a single rate of 18% or dual rates of 12% and 18%, could potentially make the system easier for businesses to comply with, reduce administrative costs, and promote transparency and efficiency in the tax system.