Major GST revamp: Modi govt proposes reducing GST slabs from 4 to 2, 99% of items currently in 28% slab to be shifted to 5%; Details here
The central government is planning a major change in the Goods and Services Tax (GST) structure, according to media reports. Under the proposal, there will be only two main GST slabs i.e. 5 per cent and 18 per cent. Around 90 per cent of the items currently in the 28 per cent slab will be shifted to the 18 per cent slab, and 99 per cent of the items in the 12 per cent slab will move to the 5 per cent slab.
A special 40 per cent GST rate will be kept only for a few luxury and 'sin' goods like tobacco, gutkha, and cigarettes. This list will have just 5–7 items and will not include aspirational products such as refrigerators, air conditioners, and washing machines.
Petroleum products will continue to remain outside the GST system even after the changes. Sectors that are labour-intensive and export-oriented, such as diamonds and precious stones, will keep their existing tax rates.
Officials say the overall tax collection level will stay roughly the same at about 88 per cent. They believe that lowering GST rates for most items will encourage people to spend more, which in turn will make up for any short-term loss in tax revenue.
The plan is based on Union Finance Ministry data showing that most GST revenue comes from items in the 18% slab—about 67 per cent of the total. In comparison, the 28 per cent slab brings in 11 per cent, the 12 per cent slab 5 per cent, and the 5 per cent slab 7 per cent.
This proposal comes shortly after Prime Minister Narendra Modi's Independence Day speech, where he promised GST reforms as part of a 'double Diwali' for the country. The focus will be on rationalising tax rates so that all sections of society, especially the common man, women, students, the middle class, and farmers, benefit.
Alongside this, the PM also announced other major initiatives, including a national deep-water exploration mission to boost energy self-reliance and the creation of an indigenous 'Sudarshan Chakra' defence system by 2035.
The GST Council, which includes state finance ministers, is expected to review and possibly approve the proposal in September or October.
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