5% GST can be increased to 6%

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

             The exercise assumes GST collection of  Rs.1 trillion a month. According to the official data, the 5 per cent slab accounts for roughly 5 per cent of GST collection. The GST panel, chaired by the union finance minister and comprising finance ministers of  state, 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. The compensation cess rates for sin items like cigarettes and research and aerated drinks. "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.

            According to  recent Reserve Bank of India (RBI) report, the effective GST rate in India has come down from 14.4 per cent in May 2017 to 11.6 per cent now, reducing governments revenue by approximately Rs 2 lakh crore annually.  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. 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. After two months of negative growth,  GST  revenues witnessed an impressive recovery During the month, the GST collection on domestic transactions witnessed a growth of 12%, highest during the year'', the government said in a statement.   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.

              The panel is also looking at bringing under GST items like foodgrains  that faced either value-added tax or purchase tax. " There may not be much room to substantially increase the revenue by taxing the exempt items,  unless the government is willing to consider taxing education and health care.About 34 items falling in the sin and luxury goods are taxed at 28 per cent and additional cess is levied on a few items in the same slab. They include automobiles, cigarettes, and aerated drinks, which goes to compensate  states for the revenue short-fall. For the automobile sector, the cess ranges from 1 per cent for small cars to 22 per cent for SUVs. Incidentally, due to economic slowdown, cess collection  has fallen short of the compensation requirement of states, compelling the Centre to examine measures to boost collection. The current cess on cigarettes ranges from 5 per cent plus a flat Rs 2,076 per thousand sticks of up to 65 mm to 5 per cent plus Rs 3,668 for 1,000 sticks of up to 75 mm. In fact, a cess of 36 per cent plus Rs 4,170 is levied on other forms of cigarettes. Aerated  drinks on the other hand attract a total duty of 40 per cent GST, which is 28 per cent tax and 12 per cent additional cess.