The Goods and Services Tax (GST) Council, which includes the Union Finance Minister and Finance Ministers from all states, may decide on the elimination of the 12% tax slab, reported Hindustan Times.

This move is part of a broader strategy to simplify the GST rate structure, reducing the existing four slabs to three. The report indicated that the proposal has garnered backing from officials and experts involved with the Group of Ministers (GoM) on rate changes, achieving a “near consensus.”

A source quoted in the report said, “This could be the most plausible way to undertake a revenue neutral tax rate rationalisation exercise. However, the GST Council has to take a final call.”

Impact on goods and services

Currently, the 12% tax slab encompasses a variety of goods, including condensed milk, caviar, 20-litre drinking water bottles, walkie-talkies, and contact lenses.

Other items such as sausages, frozen vegetables, pasta, and various household goods also fall under this category. Services taxed at 12% comprise specific construction projects, hotel accommodations priced up to 7,500 per day, and non-economy air travel. The shift of these goods and services to either the 5% or 18% tax brackets is expected to streamline tax filings and classifications, enhancing compliance efficiency.

Upcoming GST Council meeting

The GST Council’s forthcoming meeting, anticipated to occur in June or July, is likely to focus on rationalising rates and alleviating compliance burdens.

The council’s last meeting was held in December 2024.

Karthik Mani, Partner at BDO India, highlighted the importance of this meeting, amd said, “One of the key expectations from the 56th meeting of the GST Council is the decision on rate rationalisation on various goods and services.”

The Group of Ministers on rate changes was established on 24th September 2021, following a GST Council meeting in Lucknow. Initially led by Basavaraj S Bommai, the group is currently chaired by Bihar Deputy Chief Minister Samrat Chaudhary.

The proposal to remove the 12% slab has largely been accepted by Union and state officials, tax experts, and GoM members. This initiative is seen as a step towards achieving a more straightforward and effective GST system.