Fewer slabs, simpler rules? Next GST Council meet may trigger overhaul

India Today

16-07-2025

From simplification to slab cuts: What to expect from upcoming GST Council meet?India may be heading for changes in its goods and services tax (GST) system since it was introduced eight years ago.The upcoming GST Council meeting, likely to be held in August 2025 after the monsoon session of Parliament, could bring key reforms in the way GST is structured and collected.According to a report by The Economic Times, the Prime Minister's Office has given an in-principle nod for a complete review of the GST system. The finance ministry has already started internal consultations and will soon begin discussions with state governments to build support for the proposed changes.FOCUS ON RATE RATIONALISATION AND SIMPLIFICATIONThe Centre is working on a plan that includes changes in tax rates, fewer slabs, and simpler rules. These changes aim to reduce confusion, make tax compliance easier, and give relief to businesses and consumers.Karthik Mani, Partner, Indirect Tax at BDO India, said one of the key expectations from the 56th GST Council meeting is the long-pending decision on GST rate rationalisation.'Important items that could be discussed include GST on health and term life insurance premiums, charges by food delivery platforms, GST on drones, and charges collected by municipalities for granting extra floor space index (FSI),' he said.He also mentioned that the Council may finally take a call on whether services provided by intermediaries to foreign clients should be treated as exports.'This issue has been a major point of conflict, especially for back-office service providers and Global Capability Centres (GCCs). A favourable decision will help resolve many ongoing tax disputes,' Mani added.SETTING UP THE GST TRIBUNALAnother key expectation from the meeting is clarity on the GST Appellate Tribunal (GSTAT).Currently, in the absence of GSTAT, businesses are forced to take tax disputes directly to High Courts, which has added to the backlog of pending cases.'The Council needs to assess the progress made on GSTAT and take the necessary steps to fast-track its implementation,' said Mani.SLAB RESTRUCTURING ON THE CARDSOne of the biggest changes under consideration is reducing the number of GST slabs. At present, there are five main tax rates, nil, 5%, 12%, 18%, and 28%, along with two special rates of 0.25% and 3% for certain goods like precious metals.Of all GST goods, about 21% are taxed at 5%, 19% at 12%, and 44% at 18%. Only 3% of items fall under the top 28% slab.Officials are examining the possibility of removing the 12% slab and shifting its items to either 5% or 18%. This move is expected to make the system easier to understand and manage.A senior government official told ET that now is a good time for such a reform. 'Macroeconomic conditions are strong and stable. A simplified GST could boost the economy further,' the official said.The GST reforms are also part of India's effort to gear up for future free trade agreements (FTAs) with developed countries. A smoother tax system will help Indian businesses scale up more easily and take advantage of new global opportunities.COMPENSATION CESS AND FISCAL PLANSThe GST compensation cess, which is charged on items like cigarettes, large cars, and soft drinks, was introduced to make up for any loss of revenue states might face after GST was rolled out.The Centre had agreed to compensate states for five years till June 2022. But due to the Covid pandemic and a sharp fall in revenue, it borrowed Rs 2.69 lakh crore to support states. To repay this amount, the cess has now been extended until March 31, 2026.A separate group of ministers is working on how to handle the extra funds in the compensation cess account and what should be done with it once the dues are cleared.- EndsMust Watch
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