When the idea of rationalising India’s Goods and Services Tax slabs resurfaced, alarms were raised about what this may mean for states. Their treasuries, already stretched, could ill afford a new revenue shock. At first glance, the numbers seem daunting. Moving most items from the 12% slab to 5% and from the 28% slab to 18% appears to hand out big tax breaks that would cut into state revenues. Yet a closer look shows the impact is far smaller than what is feared.The finance ministry has proposed to the GST Council a reduction in the number of slabs from four — 5%, 12%, 18% and 28% — to two — 5% and 18% — along with a higher levy on select “sin” goods.
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