GST rates to come down drastically! 99% of items in 12% bracket may move to 5%; here's how you will benefit
(GST) reforms set to be unveiled by the Modi government.
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In his Independence Day speech, PM Modi announced that as a 'Diwali gift', the GST burden will come down for the common man.
According to a PTI report, the GST structure and slab rates are set to undergo a major revamp with only two tax slabs for most things. In the revamped GST regime proposed by the Centre, about 90% of taxable items currently in the 28% bracket are likely to be moved to the 18% slab, while 99% of items in the existing 12% slab may be shifted to the 5% bracket, government sources told PTI.
The new structure is expected to feature two main rates — 5% and 18% — along with a special 40% rate for luxury and sin goods.
The finance ministry announced that it has suggested a two-tier GST rate system to the Group of Ministers (GoM), including special rates for certain items.
This proposal is part of the government's plan to introduce "next generation" GST reforms within the current financial year, aiming to reduce the tax burden on everyday items.
The Centre has recommended to a panel of state finance ministers that the GST framework should consist of only two categories: 'standard' and 'merit'. Additionally, specific items may have special rates applied.
Presently, the GST system has four tax tiers of 5, 12, 18, and 28 percent, with essential items either exempt or taxed at lower rates, while demerit and luxury items fall under the highest tier.
Furthermore, a compensation cess is imposed at various rates on demerit and luxury goods like pan masala and cars. As the compensation cess regime is set to conclude on March 31, 2026, the GST Council will need to establish a method for determining tax rates on goods currently subject to this cess.
The GST Council, led by Finance Minister Nirmala Sitharaman and including state ministers, is anticipated to convene in September to review the GoM's proposal on rate rationalization.
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