In a significant move, the GST Council has announced the reconstitution of the Group of Ministers (GoM) tasked with recommending GST rate rationalisation. Bihar’s Deputy Chief Minister, Samrat Chaudhary, has been appointed as the new convenor, succeeding Uttar Pradesh’s Finance Minister, Suresh Khanna.
The official memorandum, although dated February 27, has only recently been posted on the Council’s website. It lists the new panel members, which include Suresh Kumar Khanna from Uttar Pradesh, Goa’s Transport Minister Mauvin Godinho, Rajasthan’s Medical and Health Services Minister Gajendra Singh, West Bengal’s Finance Minister Chandrima Bhattacharya, Karnataka’s Revenue Minister Krishna Byre Gowda, and Kerala’s Finance Minister K N Balagopal. This reconstitution was necessitated by the recent change in Bihar’s government, where the JD(U)-BJP alliance saw Samrat Chaudhary taking over the finance portfolio from Vijay Kumar Chaudhary.
The seven-member GoM now comprises four representatives from the NDA and three from opposition-ruled states. Importantly, there is no alteration to the committee’s terms of reference. Initially established with a mandate to report within two months, the committee’s objective remains to recommend measures that can be swiftly implemented, as well as to chart out a roadmap for medium and long-term reforms.
Key Proposal for Rate Rationalisation
Central to the GoM’s mandate is a pivotal proposal to reduce the number of primary GST rates from four to three. This could potentially be achieved by merging either the 12 per cent and 18 per cent rates to a new 15 per cent rate or combining the 5 per cent and 12 per cent rates to an 8 per cent rate. While this consolidation might render some items cheaper, it is anticipated that numerous goods would shift to a higher tax bracket, potentially triggering inflation. This balancing act has historically deferred rationalisation efforts, posing a substantial challenge to the current panel.
Objectives and Tasks Ahead
The GoM’s reconstitution comes with a critical mission: to streamline the GST rate structure, rectify the inverted duty structure, review exemptions, and ultimately boost GST revenues. Originally constituted in September 2021 under then Karnataka Chief Minister Basavaraj Bommai, the panel submitted an interim report in June 2022, suggesting specific changes in tax rates for certain goods and services.
The newly formed panel under Chaudhary is expected to deliver a final report to the GST Council, outlining proposed adjustments to tax rates and slabs to foster comprehensive reforms. Currently, the GST framework operates with four primary tax slabs of 5, 12, 18, and 28 per cent, alongside special rates of 0, 0.25, 1.5, 3, and 6 per cent, with a cess on luxury and demerit goods at the highest 28 per cent rate.
Upon the panel’s submission, the Fitment Committee will scrutinise the recommendations and finalise the agenda for the GST Council. Following the Council’s deliberations and decisions, the Centre and States, including the three Union Territories with legislative assemblies, will proceed to notify the new rates, thus embarking on a path to potentially transformative GST reforms.