Will the GST Council Remove the 12% Slab?
The GST Council is reportedly considering a major rejig of India’s four-slab GST structure by eliminating the 12% rate. If implemented, this would simplify the current 5%, 12%, 18%, and 28% regime into a three-tier system—a move that could affect pricing, input tax credit, and compliance for lakhs of businesses.
This blog simplifies the issue and explains what this change could mean for you.
Why is the 12% GST Slab Being Removed?
- Rationalisation Push: The 12% slab overlaps with both 5% and 18% categories. The government sees room to streamline.
- Simplification Goal: Fewer slabs = easier classification, better compliance.
- GST Review Committee Recommendation: Past committees have suggested a 3-slab system for better revenue predictability.
Possible New GST Structure
| Current Slabs | Proposed Slabs |
|---|---|
| 5% | 5% |
| 12% | To be eliminated |
| 18% | 18% |
| 28% | 28% |
Goods and services currently taxed at 12% may either:
- Move to 5% (if seen as essential/low revenue impact), or
- Move to 18% (if classified as luxury or higher revenue yield).
Impact of Removing 12% GST Slab
- Prices may rise if 12% items shift to 18%.
- Cheaper options possible if reclassified under 5%.
For Businesses
- Simplified rate application
- Possible need to update invoicing systems
- Change in ITC calculations (especially in mixed-rate supply chains)
For Government
- Better tax buoyancy (if most 12% goods move to 18%)
- Simplified audits and lower classification disputes
Key Goods/Services Currently at 12%
| Item/Service | Likely Rate After Change |
|---|---|
| Packaged food (cornflakes, ghee) | May go to 5% or 18% |
| Mobile phones | Likely 18% |
| Fertilizers | May remain 5% (essential) |
| Business class rail travel | Likely 18% |
| Insurance (certain types) | May remain 18% |
Note: Final classification will depend on Council decisions and public feedback.
Expert View:
“This change is aimed at simplifying GST, but it may create short-term pricing challenges for mid-range products currently taxed at 12%. Businesses must gear up for reclassification and IT adjustments.” — CA Raghav Joshi, GST Consultant
Will This Affect Compliance & Filing?
Yes. Businesses must:
- Update product/service mapping
- Align invoices, GST returns, and ERP software
- Watch for transitional input credit issues
- Await official notification before changes are enforceable
Legal Angle
- As of now, no official notification has been issued by CBIC or GST Council.
- Any such change would likely come through notification under Section 9 of CGST Act and require approval from majority of states.
FAQ: GST Slab Restructuring
Q1. Has the GST Council officially removed the 12% slab?
Not yet. The proposal is under discussion and may be taken up in upcoming meetings.
Q2. Will my GST return filing change?
Filing forms won’t change, but you may need to update product rate codes (HSN/SAC).
Q3. Can this affect my pricing model?
Yes. Reclassification from 12% to 18% can increase consumer prices.
Summary
GST Council may remove the 12% slab to simplify the tax structure. This could move items to 5% or 18% slabs, impacting pricing, ITC, and business compliance. No official notification yet.
Final Thoughts
The proposed removal of the 12% GST slab signals a long-term simplification drive. Businesses should start preparing, but avoid making any changes until official notification is released.