Centre Pushes GST Simplification: 5% and 18% Slabs Proposed
GoM meets to discuss Centre's bold GST rate cut plan.
A pivotal meeting of the Group of Ministers (GoM) on GST rate rationalisation convened on Thursday to deliberate on the Centre's ambitious proposal to streamline Goods and Services Tax (GST) slabs from four (5%, 12%, 18%, and 28%) to just two (5% and 18%). The move aims to simplify India’s tax structure, reduce compliance burdens, and provide relief to consumers, farmers, the middle class, and micro, small, and medium enterprises (MSMEs).
The six-member GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, includes finance ministers from Uttar Pradesh (Suresh Kumar Khanna), Rajasthan (Gajendra Singh), West Bengal (Chandrima Bhattacharya), Karnataka (Krishna Byre Gowda), and Kerala (K N Balagopal). The panel is tasked with evaluating the Centre’s plan to reclassify goods and services into ‘merit’ and ‘standard’ categories, taxed at 5% and 18%, respectively. A special 40% rate has also been proposed for a select few items, primarily sin goods like tobacco and luxury products.
Finance Minister Nirmala Sitharaman, addressing related GoM discussions on Wednesday, emphasized that the rate rationalisation would foster a “simplified, transparent, and growth-oriented tax regime.” Under the proposal, 99% of items currently taxed at 12% would shift to the 5% slab, while 90% of those in the 28% bracket would move to 18%. This restructuring is expected to lower costs for essential goods and services, benefiting millions of consumers and businesses.
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The GoM’s discussions follow a separate meeting on Wednesday evening, where the panel on insurance reviewed a proposal to exempt GST on individual health and life insurance policies. This exemption could result in a revenue loss of approximately ₹9,700 crore annually, but most states supported the move, stressing the need for mechanisms to ensure policyholders directly benefit from the tax relief.
Thursday’s meeting is a critical step toward finalizing the rate rationalisation framework. The GoM will assess the economic impact, potential revenue implications, and feedback from states to ensure the reforms balance fiscal stability with public welfare. The proposal, if approved by the GST Council, could mark one of the most significant overhauls of India’s GST system since its introduction in 2017, potentially easing the tax burden on households and boosting economic growth.
Industry experts and business leaders are closely watching the outcome, as the simplified tax structure could enhance compliance and reduce operational costs for MSMEs. However, concerns remain about the classification of certain goods and the feasibility of implementing the special 40% rate for select items. The GoM is expected to present its recommendations to the GST Council soon, setting the stage for a potential landmark reform in India’s taxation landscape.
