New Delhi, August 21: The Group of Ministers (GoM) on Goods and Services Tax (GST) rationalisation has approved the central government’s proposal to adopt a simplified two-slab structure of 5 percent and 18 percent. The decision was taken during a key meeting held on Thursday, aiming to make the current complex tax structure more efficient and business-friendly.
Bihar Deputy Chief Minister Samrat Choudhary, who heads the GoM, stated that the six-member state ministers' panel has agreed to eliminate the existing 12 and 28 percent tax slabs in line with the Centre’s recommendation. Speaking to the press after the meeting, Choudhary confirmed that the GoM has accepted both proposals put forward by the Centre.
Currently, GST operates under a four-tier rate system—5, 12, 18, and 28 percent—with basic necessities like food items either exempt or taxed at the lowest rate of 5 percent. Luxury and socially undesirable items attract the highest 28 percent rate, along with an additional cess in certain cases, such as cars.
As per agency report, Uttar Pradesh Finance Minister Suresh Kumar Khanna clarified that the Centre’s revised framework also includes a 40 percent GST slab exclusively for luxury and demerit goods. This new upper slab is intended to cover high-end items considered socially or environmentally harmful.
However, some states have expressed reservations. West Bengal Finance Minister Chandrima Bhattacharya proposed that an additional tax be levied above the 40 percent GST rate to maintain the current effective taxation on luxury products like cars. She also pointed out that the Centre’s proposal did not clearly indicate how the potential revenue shortfall from this restructuring would be addressed.
While the proposal is a significant move toward rationalising India's indirect tax regime, concerns about its impact on state revenues and tax collections remain. The Centre has yet to specify how it plans to offset the losses arising from removing the two middle slabs. Nevertheless, the approval by the GoM marks a critical step forward in overhauling the GST framework to make it simpler and more equitable.
