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India’s Goods and Services Tax (GST) regime is set for its biggest revamp since its launch in 2017. The Group of Ministers (GoM) on GST rationalisation has accepted the Centre’s proposal to move to a simplified two-slab structure of 5% and 18%, scrapping the existing 12% and 28% slabs.
What’s going on: the GoM’s nod comes after the Centre unveiled a reform blueprint on August 15 built on three pillars including structural reforms, rate rationalisation, and ease of living. The idea is to simplify compliance, cut litigation, and make GST fairer across sectors.
Why it matters: GST has often been criticised for its complexity and multiple tax rates, which led to confusion for businesses and compliance hurdles, especially for MSMEs. Moving to a two-rate structure makes the system easier to understand and reduces disputes.
The scrapping of the 28% slab earlier applied to items like luxury cars, sin goods, and select consumer durables could ease tax burdens in some categories, though compensatory cess may still apply on tobacco, aerated drinks, and high-end vehicles.
How does it help: a two-slab GST potentially means lower prices on select goods. For MSMEs and small traders, compliance becomes easier with fewer rates to track and file, cutting both time and cost.
For the middle class, rationalisation could ease the tax burden on daily-use items, while big-ticket purchases may see more transparency in pricing. In short, the shift makes GST simpler, fairer, and more predictable benefiting everyone from farmers to corporates to consumers.
