Exciting Breakthrough: GST Rate Rationalisation and Simplification Underway as Centre and States Unite

The Indian government, while announcing income tax rate changes, is also working on simplifying the Goods and Services Tax (GST) regime. Deliberations between the central and state governments are underway to streamline GST rates and structure, with a focus on potentially eliminating the 12% slab, The Indian Express reports. A ministerial panel set up for GST rate rationalization is reviewing the classification of items across the different GST slabs – 0%, 5%, 12%, 18%, and 28%. However, despite discussions aiming to simplify this structure, the panel has suggested retaining the 12% slab instead of reducing the number of slabs, a decision flagged as inconsistent with the goal of simplification.

The discussions also covered a proposition to merge the 12% and 18% slabs into a single 15% slab to create a three-slab structure. This idea met resistance due to potential substantial revenue loss from reducing the 18% items to 15%. Concerns were raised about a new 15% slab leading to higher costs for certain pharmaceutical items. Presently, the 18% slab accounts for 70-75% of GST revenue, whereas the 12% slab accounts for only 5-6%. The GST’s current tiers—zero, 5%, 12%, 18%, and 28%—include an additional compensation cess on certain luxury items.

At its latest meeting in Jaisalmer, the GST Council discussed reducing rates on multiple items but postponed decisions on crucial areas such as health and life insurance premiums. Meanwhile, the panel on rate rationalization is expected to discuss rate adjustments for 148 items in an upcoming GST Council meeting. These ongoing efforts highlight the complexities of aligning tax structures to support economic goals and fairness.

Original Source: https://indianexpress.com/article/business/economy/gst-rate-rationalisation-simplification-in-the-works-discussion-between-centre-states-underway-9813954/
Category : Business,Economy
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Publish Date: 2025-02-03 04:18:00