Recommendations simplifying India’s indirect tax regime will be placed before GST Council in a meeting before Diwali
A key meeting of the Group of Ministers (GoM) on GST rate rationalization concluded on Thursday with states broadly backing the Centre’s proposal to simplify the indirect tax system by reducing the number of slabs, according to reports.
The six-member panel, chaired by Bihar Deputy Chief Minister Samrat Choudhary, agreed to move from the current four-tier structure of 5%, 12%, 18% and 28% to just two rates – 5% for essential goods and services and 18% for standard items. A higher 40% levy will continue on select sin goods, with luxury cars also proposed under this slab.
The GoM includes ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala. Finance Minister Nirmala Sitharaman, addressing the panel, said the rejig would ease the burden on farmers, the middle class, and MSMEs, while creating a simpler, transparent, and growth-focused tax framework.
Moving To A Two-Slab Structure
Under the new structure, 99% of items in the 12% category would shift to 5%, while nearly 90% of those under 28% would move to 18%. The Centre has argued this will enhance compliance and streamline taxation.
The GoM also considered exempting GST on individual health and life insurance premiums, a move with a potential annual revenue impact of ₹9,700 crore. Most states supported the proposal but stressed safeguards to ensure insurers pass on the benefit to customers.
The recommendations will now be placed before the GST Council in its next meeting for final approval. The council is expected to meet in September or October, ahead of Diwali.
Indian equity markets held their gains for the sixth consecutive session, as investors cheered the potential GST reforms. Both Nifty and Sensex were up over 0.2% at the time of writing.
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