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GST tax rate at 12.2%, much below revenue neutral rate

Union Finance Minister Nirmala Sitharaman has said the Goods and Services Tax (GST) rate is much below the revenue neutral rate (RNR), originally suggested at 15.3 percent. The current average GST rate has decreased to 12.2 percent as of 2023, she said. The comments come ahead of the 54th GST Council meeting on September 9 in New Delhi, which will be closely tacked for relief, if any, for the real estate sector and health and life insurance buyers.

“We are much below the revenue neutral rate in GST,” Sitharaman said, underscoring the government's focus on increasing revenue collections but not before easing the compliance burden. “We need to raise revenue, but simplifying, easing, and ensuring compliance for taxpayers comes first,” the minister said at an event organised by the Revenue Bar Association.

The revenue neutral rate is the rate of tax at which the government collects the same amount of revenue even after changes in tax laws. Since its implementation, the GST system has undergone several revisions to streamline the process and promote ease of doing business.

Sitharaman reiterated the government’s commitment to simplifying tax compliance while maintaining a balance between the Centre’s fiscal needs and the ease of administration for citizens.