GST reform plan:two slabs,special rates on select goods

The Union finance ministry on Friday unveiled a proposal to overhaul the Goods and Services Tax (GST) framework, suggesting a simplified two-slab rate structure along with special rates for select items. The proposal, shared with the Group of Ministers (GoM) on rate rationalisation, aims to reduce the tax burden, especially on small industries, and streamline compliance.The announcement comes shortly after Prime Minister Narendra Modi, in his 79th Independence Day address, assured the nation that GST reforms would be implemented by Diwali. Modi said the changes would “lower the tax burden substantially and benefit small industries,” positioning the reform as a key festive season relief measure.
Three-Pillar Reform Plan
According to the finance ministry, the Centre’s proposal rests on three pillars: structural reforms, rate rationalisation, and ease of living. The proposed framework would move away from the current four-tier GST structure of 5%, 12%, 18%, and 28% towards a simplified system with two primary slabs — standard and merit rates.Special rates would be reserved for a small set of goods, with a focus on lowering taxes on essential “common man” items as well as certain aspirational products to boost consumption,according to information.
Fiscal Space for Reform
The ministry noted that the conclusion of the GST compensation cess period has created additional fiscal space, allowing greater flexibility to adjust and align tax rates for long-term sustainability within the GST framework.The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state finance ministers, is expected to convene in September to deliberate on the GoM’s recommendations. The rate restructuring, if approved, would mark the most significant change to GST since its rollout in July 2017.

(Business Correspondent)