Centre’s GST Rate Rationalisation Proposal Reviewed by GoM

The Centre’s long-awaited GST rate rationalisation proposal was taken up by the Group of Ministers (GoM) on August 21 for review and approval. Once cleared, the proposal will be forwarded to the GST Council in its September meeting for final discussion.

What the Proposal Includes

The proposal, presented by Finance Minister Nirmala Sitharaman, seeks to simplify the tax structure by reducing the multiple GST slabs into two—5% and 18%.

• Goods currently in the 12% bracket may move down to 5%.

• Items attracting 28% GST could be brought down to 18%.

• A higher 40% slab on select sin goods has also been suggested.

Sitharaman emphasized that rate rationalisation will bring relief to farmers, the middle class, MSMEs, and the common man, while ensuring a transparent and growth-focused tax system.

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GoM Review

The six-member GoM, chaired by Bihar Deputy CM Samrat Choudhary, includes state finance ministers from Kerala, Uttar Pradesh, Rajasthan, West Bengal, and Karnataka. The panel will also evaluate the classification of goods into ‘merit’ and ‘standard’ categories, which will determine the final applicable rates.

Market Insights & Impact

Markets have welcomed the reform outlook, with analysts noting that lower GST slabs could boost demand for packaged goods and essentials. A simpler structure is expected to aid consumption and support India’s economic growth momentum.

Key Insights

• Two main slabs proposed: 5% & 18%.

• 40% slab on sin goods under discussion.

• Relief aimed at farmers, MSMEs, middle class.

• GST Council to take final call in September meeting.

This marks the first time the Centre has formally initiated a GST slab rejig, highlighting a shift towards simplification and consumer relief.

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