GST 2.0 reforms: From 4 slabs to 2, simpler tax system ahead
(You can now subscribe to our Economic Times WhatsApp channel
Over the last eight years since the introduction of GST, the focus has been on compliance and expanding the tax base. With average monthly GST collections of over ₹1.8 lakh crore in FY25 and a tax base exceeding 1.5 crore, the time has come for 'next generation GST reforms ', as announced by the prime minister on Independence Day.We are now set for GST rate rationalisation, with four main rate slabs of 5, 12, 18 and 28% likely to give way to two slabs of 5 and 18% (with a few 'sin' products subject to 40%). This means that most items currently under the 12% slab could attract a lower rate of 5% (including many food and household products) and those under 28% might be reduced to 18% (including cement and cars). This will significantly boost consumption and spur economic activity, without impacting government revenues too much, as over 70% of collections come from the 18% category. It would also reduce disputes on product classification and simplify the overall tax structure.As the new rate structure takes shape, the GST Council should ensure it does not create an 'inverted duty' structure and, if it does, the laws are amended to allow refunds of accumulated credits. Industry will also need to watch for any changes to the 'anti-profiteering' provisions, which were in force until March 31, 2025. In any case, market forces should ensure that the benefits of GST cuts are passed on to consumers.An exciting Diwali lies ahead for all of us!
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
2 minutes ago
- Economic Times
GST rate rejig: Sitharaman to address Aug 20 GoM meet to put forth Centre's rate cut proposal
Synopsis Finance Minister Nirmala Sitharaman will address a key meeting of state finance ministers on August 20–21 to push for major GST reforms. The Centre has proposed a simplified two-slab structure of 5% and 18%, along with a 40% rate for select demerit goods like tobacco and online gaming. The plan aims to ease the tax burden on the middle class, MSMEs, and the farm sector by removing the current 12% and 28% slabs. Agencies Finance Minister Nirmala Sitharaman will on Wednesday address a crucial meeting of a group of ministers of states as she makes a case for the sweeping GST reforms that will slash tax rates and lead to reduction in prices of common use items. The Centre has proposed a 2-tier GST structure of 5 and 18 per cent, besides a 40 per cent special rate on a select few items to the GoM on GST rate rationalisation. The proposal, which entails removing the current 12 and 28 per cent tax slabs, will be discussed at the 2-day meeting of the state ministerial panel on August 20 and 21 here in the national capital, sources said. "The idea is to put forth the Centre's view point behind the GST reform proposal. Although the Centre is not a member of the GoM, Union Finance Minister's presence and her address will give the GoM a better understanding of the idea and thought process behind the Centre's proposal," a source told PTI. Bihar Deputy Chief Minister Samrat Choudhary is the convenor of the six-member GoM. The other members are Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, Kerala Finance Minister K N Balagopal. The Centre has proposed two-slab structure of 5 and 18 per cent classifying items under the category of 'merit' and 'standard' and the broad principle followed in the classification is to reduce tax burden for middle class, MSMEs, and the farm sector. The proposed 40 per cent slab, the highest permissible tax rate under the GST law, will be only for about 5-7 items, including demerit goods like pan masala, tobacco and online gaming. Goods and Services Tax (GST) is currently levied at 5, 12, 18 and 28 per cent. While food and essential items are either at nil or 5 per cent, luxury and demerit goods are in 28 per cent slab, with a cess on top of it. If the Centre's proposal is accepted by the GoM, it would be placed before the GST Council, chaired by Sitharaman and comprising finance ministers from all states and UTs, in its meeting likely next month. The Centre's proposal entails moving 99 per cent of the goods in the current 12 per cent slab to 5 per cent, and 90 per cent of the goods and services in 28 per cent slab to the 18 per cent bracket.
The Hindu
3 minutes ago
- The Hindu
GST rate rejig: Nirmala Sitharaman to address GoM meet to put forth Centre's rate cut proposal on August 20
Finance Minister Nirmala Sitharaman will on Wednesday (August 20, 2025) address a crucial meeting of a group of ministers of States as she makes a case for the sweeping GST reforms that will slash tax rates and lead to reduction in prices of common use items. The Centre has proposed a 2-tier GST structure of 5 and 18%, besides a 40% special rate on a select few items to the GoM on GST rate rationalisation. The proposal, which entails removing the current 12 and 28% tax slabs, will be discussed at the 2-day meeting of the state ministerial panel on August 20 and 21 in New Delhi, sources said. "The idea is to put forth the Centre's view point behind the GST reform proposal. Although the Centre is not a member of the GoM, Union Finance Minister's presence and her address will give the GoM a better understanding of the idea and thought process behind the Centre's proposal," a source told PTI. Bihar Deputy Chief Minister Samrat Choudhary is the convenor of the six-member GoM. The other members are Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda, Kerala Finance Minister K N Balagopal. The Centre has proposed two-slab structure of 5 and 18 per cent classifying items under the category of 'merit' and 'standard' and the broad principle followed in the classification is to reduce tax burden for middle class, MSMEs, and the farm sector. The proposed 40% slab, the highest permissible tax rate under the GST law, will be only for about 5-7 items, including demerit goods like pan masala, tobacco and online gaming. Goods and Services Tax (GST) is currently levied at 5, 12, 18 and 28%. While food and essential items are either at nil or 5%, luxury and demerit goods are in 28% slab, with a cess on top of it. If the Centre's proposal is accepted by the GoM, it would be placed before the GST Council, chaired by Sitharaman and comprising finance ministers from all states and UTs, in its meeting likely next month. The Centre's proposal entails moving 99% of the goods in the current 12% slab to 5%, and 90% of the goods and services in 28% slab to the 18% bracket.
India.com
3 minutes ago
- India.com
This company hits upper circuit after Q1 results 2025
1 लाख के निवेश पर 10 लाख का फायदा Shares of IT company Blue Cloud Softech Solutions are in action today as they hit a 5 per cent upper circuit on Monday, August 18, 2025 as soon as the market opened for trading. The action in stock comes amid a spurt in trading voluem. According to BSE Analytics, around 13.86 lakh equity shares of the company changed hands on the stock exchanges as compared to the two-week average quantity of 7.96 lakh shares. Technically, the counter trades higher than the 5-day, 20-day, 50-day and 100-day moving averages but lower than the 200-day moving averages. The 52-week high of the stock is Rs 118.43 and the 52-week low is Rs 14.95. The market cap of the company is Rs 1,462.42 crore. Q1 FY26 Results Key Highlights – Consolidated Profit After Tax (PAT) up 37 per cent YoY (year-on-year) at Rs 14.4 crore against Rs 10.5 crore in the same quarter a year ago. – Profit Before Tax (PBT) surges 33 per cent YoY. – However, the company's income from operations stood at Rs 206.19 crore against Rs 231.4 crore in Q1 FY25. – The standalone net profit stood at Rs 13.29 crore in Q1FY26, registering a growth of 71.7 per cent from Rs 7.74 crore in the year-ago quarter. – Operational efficiency at peak – Margins expanding sharply. – Singapore subsidiary ready to open global growth gates. – Despite a slight dip in revenues, profits are at all-time highs. Meanwhile, benchmark indices Sensex and Nifty opened gap up in early trade on Monday, buoyed by plans for big bang reforms in the GST regime by Diwali. The 30-share BSE Sensex jumped 1,021.93 points to 81,619.59 in early trade. The 50-share NSE Nifty surged 322.2 points to 24,953.50. From the Sensex firms, Maruti, Bajaj Finance, Mahindra & Mahindra, UltraTech Cement, Trent and Bajaj Finserv were among the major gainers. (This article is for informational purposes only and should not be construed as investment, financial, or other advice.)
