In a significant development, the Group of Ministers (GoM) on state finance ministers has approved the Centre’s proposal to rationalise Goods and Services Tax (GST) rates. The meeting discussed the reduction of tax slabs to just two—5% and 18%—a plan which received the GoM’s consent. The Centre has suggested removing the existing 12% and 28% slabs, leaving only two tax rates in place. Additionally, the government has proposed a special 40% rate on products like tobacco and pan masala. The move aims at providing relief to citizens, farmers, the middle class, and MSMEs.
The new system is set to replace the existing four-tier structure of 5%, 12%, 18%, and 28%. A six-member ministerial panel, chaired by Bihar Deputy Chief Minister Samrat Choudhary, endorsed the proposal to restructure GST slabs. As per the new framework, essential goods would attract a 5% tax, while general goods would fall under the 18% slab. Harmful items such as tobacco will see a steep 40% levy. The decision is expected to simplify the overall tax system, ensuring ease of compliance while reducing complexities in GST administration.
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Union Finance Minister Nirmala Sitharaman welcomed the recommendations, stating that the revised structure would significantly benefit common citizens, farmers, the middle class, and Micro, Small, and Medium Enterprises (MSMEs). According to her, the rationalisation ensures a simpler and more transparent taxation framework. Currently, GST is levied at 5%, 12%, 18%, and 28%. Food and essential commodities either fall under the zero or 5% bracket, while luxury and harmful goods are taxed at 28% along with an additional cess. The revised model aims to balance revenue needs with public relief.