The government is preparing to simplify the Goods and Services Tax (GST) system further. In a recent meeting of the Group of Ministers (GoM), a consensus was reached to rationalise the GST slabs as proposed by the Centre. During the meeting, state finance ministers agreed to reduce the current four GST slabs to just two. This means that the existing 12% and 28% GST slabs will be removed, and only 5% and 18% slabs will remain.
Will there be only two GST slabs now?
The six-member GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, has decided that GST rates will be divided into two main slabs. Essential and commonly used goods will fall under the 5% slab, while most standard goods and services will be taxed at 18%. Additionally, luxury goods will remain in a separate 40% slab.
Following this decision, nearly 99% of the items that previously attracted a 12% GST will now be moved to the 5% slab. Similarly, around 90% of items that were earlier taxed at 28% will now fall under the 18% slab. This restructuring aims to make the tax system simpler and more transparent, benefiting both the general public and businesses.
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The GoM has also recommended that luxury cars should be taxed at 40%. Along with this, certain harmful products will also be included in the same slab. Finance ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala supported this proposal, stating that the move would increase transparency and encourage more taxpayers to comply with GST regulations.
Finance Minister Nirmala Sitharaman’s statement
Finance Minister Nirmala Sitharaman said during the meeting that making tax rates more reasonable would benefit the common people. She explained that the new structure would make the tax system simpler and more transparent. She also highlighted that the revised slabs would lower GST rates on several products, resulting in reduced prices and providing relief to consumers.