Goods and Services Tax: 12% and 28% GST slab will end, Centre's proposal gets approval

Goods and Services Tax: The Government of India is taking rapid steps towards further simplifying the Goods and Services Tax (GST) system. Recently, an important meeting of the Group of Ministers (GoM) was held, in which a consensus was reached on rationalizing and simplifying the GST slabs. In this meeting, the Finance Ministers of the states supported reducing the existing four slabs (5%, 12%, 18%, and 28%) to only two slabs (5% and 18%). Additionally, a special 40% slab has been proposed for luxury goods.

Only two GST slabs: A revolutionary change

The six-member Group of Ministers constituted under the chairmanship of Bihar Deputy Chief Minister Samrat Choudhary decided that GST rates will be divided into only two slabs. Under this:

A rate of 5% will be applicable on essential and good goods.

Standard goods and services will be taxed at the rate of 18%.

A higher rate of 40% will be applicable on luxury goods and harmful products.

As a result of this change, about 99% of the items that were earlier in the 12% slab will now move to the 5% slab. Similarly, about 90% of the items in the 28% slab will be brought to the rate of 18%. This move will not only simplify the tax system but also make it more transparent and consumer-friendly.

Benefits to traders and general public

This new arrangement will make tax compliance easier for traders, as having fewer slabs will simplify the process of tax calculation and filing returns. Besides, consumers will also get relief in the form of reduction in prices of many items. For example, items that were earlier taxed at 12% or 28% may now see reduced prices.

Special focus on luxury cars and harmful goods

The GoM has suggested that luxury cars and certain harmful goods, such as tobacco products, be placed in the higher slab of 40%. The move is aimed at raising revenue and promoting social interests by levying higher taxes on luxury and harmful products. This proposal has also been supported by the Finance Ministers of Uttar Pradesh, Rajasthan, West Bengal, Karnataka and Kerala.

Statement of Finance Minister

Union Finance Minister Nirmala Sitharaman said after this meeting, "By rationalizing and simplifying the GST slabs, our aim is to provide relief to the general public and bring transparency in the tax system. This new system will not only reduce tax rates, but consumers will also get the benefit of cheaper prices." She also added that this move will increase the number of tax payers, which will also improve revenue collection.