Simplified GST rates to include 5% on essential goods and 18% on most items, aiming to ease compliance and benefit consumers and businesses.
GST Rate Rationalisation: Major Shift Approved by Key Panel
The Group of Ministers (GoM) on GST rate rationalisation, led by Bihar Deputy Chief Minister Samrat Choudhary, has agreed to the Centre’s proposal to reduce GST slabs from four to two. This significant change aims to simplify the tax structure and improve compliance across the country.
New GST Structure: Two Main Slabs
- 5% GST: Applies to ‘merit’ goods and essential services.
- 18% GST: Applies to most other goods and services categorized as standard.
Additionally, a 40% ‘sin’ tax will continue to be imposed on a limited set of items, including alcohol, tobacco, drugs, gambling, fast food, and soft drinks. The purpose of this higher tax is to discourage consumption due to their harmful effects.
Why the Change?
Finance Minister Nirmala Sitharaman emphasized that the simplified GST structure will:
- Benefit the common man, farmers, middle-class, and small businesses.
- Make GST more transparent and easier to manage.
- Support economic growth by reducing tax complexity.
Key Revisions in Tax Slabs
- Items currently taxed at 12% will mostly move to the 5% slab.
- Products taxed at 28% will largely shift to the 18% slab.
This restructuring aims to reduce confusion, enhance compliance, and streamline the GST system.
GST Exemption on Insurance Premiums
The GoM also considered the Centre’s proposal to exempt GST on individual health and life insurance premiums. While most states supported this move, they recommended strict monitoring to ensure insurance companies pass on the benefits to customers. This exemption could result in an estimated revenue loss of Rs 9,700 crore annually.
What’s Next?
The GST Council will make the final decision on the proposed changes in its next meeting scheduled for September. If approved, the new GST slabs will mark a major reform in India’s indirect tax system.
The Centre’s proposal to reduce GST slabs from four to two received key panel approval, with the aim of simplifying taxes, supporting growth, and easing the burden on consumers and businesses.
Also Read : Centre Proposes Zero GST on Health & Life Insurance Premiums for Individuals
