India is set to witness the biggest revamp of the Goods and Services Tax (GST) since its rollout in 2017, with the Prime Minister’s Office (PMO) giving an in-principle go-ahead for a wide-ranging restructuring of the tax framework, sources told The Economic Times.
The proposed overhaul will likely be discussed in the upcoming GST Council meeting in August, once the monsoon session of Parliament concludes. The finance ministry has already begun reaching out to states to build political consensus on the move. Inter-ministerial consultations with key departments are also underway.
Officials familiar with the discussions told ET that the revamp will focus on two main aspects: rationalising the GST rate slabs and simplifying compliance procedures. The goal is to provide relief to both consumers and businesses and make the tax regime more efficient.
Moneycontrol could not independently verify the news report.
One major change under consideration is scrapping the 12 percent slab entirely. Items under this category could be moved to either the 5 percent or 18 percent slab. Currently, GST has five major slabs: 0 percent, 5 percent, 12 percent, 18 percent, and 28 percent, with additional lower slabs of 0.25 percent and 3 percent for bullion.
As per official data:
21 percent of GST items fall under the 5 percent slab
19 percent are taxed at 12 percent
44 percent fall under the 18 percent slab
Only 3 percent of goods are in the highest 28 percent category
A ministerial panel was earlier tasked with reviewing rate rationalisation, but progress has been slow. However, with macroeconomic fundamentals looking strong and upcoming trade agreements with advanced economies on the table, the government sees this as the right moment for reform.
The review will also examine the future of the compensation cess, currently levied on sin goods such as tobacco and high-end cars under the 28 percent slab, the ET report added. Though it was originally meant to help states offset revenue losses from the GST transition until 2022, the cess was extended until March 2026 to repay Rs 2.69 lakh crore borrowed by the Centre during the Covid period. A separate ministerial group is reviewing how the surplus cess funds should be used going forward.
This revamp of the GST system comes alongside the government’s plans to introduce a new income tax law, also expected to be tabled during the monsoon session, the report added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
