NEW DELHI: The GST council is set for a major restructuring to raise the base slab from 5% to 9-10%, while doing away with the 12% rate and moving 243 items in this segment to the 18% band — moves that will increase the tax burden on consumers but which may generate close to Rs 1 lakh crore of additional revenue.

In addition to the proposed recalibration of rates, several items currently exempted from tax — from treatment in "costly" private hospitals to hotel accommodation under Rs 1,000 and high-value company home leases — may be brought under the ambit of the tax, as per the sources. The likes of lotteries, flight travel, rail travel will see a significant rise in prices.

A reduction in tax rates on hundreds of items since GST was kicked off in July 2017 meant the effective rate of tax has come down from 14.4% to 11.6%, resulting in annual revenue hit of around Rs 2 lakh crore.

An economic slowdown has accentuated the problem, impacting tax collections of the Centre and states and creating a situation where the monthly compensation burden on the Centre is estimated to rise to around Rs 13,750 crore this year, compared to one-third of that in July-March 2017-18. An official estimate suggested that next year, the monthly compensation bill may cross Rs 20,000 crore as the Centre has to compensate states in case revenue growth is below 14%.

Faced with a tough call, the Centre is expected to set out the scenario and choices before the states. It is also being argued that while prices will go up, moderate inflation in the past few years needed to be kept in mind as also that the actual increase is not likely to be large for several items. Items in the zero-tax category are not being touched. Changing the lowest slab may contribute most to revenue increase.