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The Goods and Services Tax (GST) Council is preparing to review a major change in India's indirect tax structure. The council, headed by the Union finance minister and comprising finance ministers from states and union territories, will meet in New Delhi to consider reducing the current four-tier system into a simpler two-slab structure. A Group of Ministers has already given in-principle approval to the plan, which proposes 5 % and 18 % rates, along with a 40 % levy on ultra-luxury and sin goods. The meeting will also deliberate on cess rationalisation and insurance-related relief.
The Goods and Services Tax Council, chaired by the Union finance minister, will soon hold a two-day meeting in New Delhi to discuss changes to the GST framework. The agenda includes a proposal to replace the present four-tier system of 5 %, 12 %, 18 % and 28 % with a simplified two-rate structure. Advertisement
The proposed reform suggests classifying goods and services into two categories-merit and standard with tax rates of 5 % and 18 %. A higher special rate of 40 % is planned for a small set of products, including ultra-luxury vehicles and sin goods such as tobacco and similar items.
In preparation for this meeting, the Group of Ministers comprising state finance ministers convened last week and signalled their agreement in principle to the Centre's suggestion. Their discussions centred on the long-term benefits of simplification while also raising concerns about potential revenue loss that may follow a shift to fewer tax slabs.
Alongside the rate restructuring, the council will also deliberate on recommendations relating to compensation cess. The agenda includes the possibility of rationalising the cess structure to balance revenue needs of states and to address industry concerns. Relief for individual health and life insurance premiums is also under consideration, an issue that has been discussed in earlier council sessions but has not yet been concluded.
Officials' level meetings are being organised ahead of the council's session to fine-tune the proposals and finalise data for discussion. State representatives have emphasised the need for a clear estimate of the financial impact, pointing out that the implications on state revenues must be carefully reviewed before changes are implemented.
The move towards a simpler GST structure forms part of a broader effort by the Centre to make indirect taxation easier to understand and administer. This follows repeated demands from industry bodies and tax experts who have long highlighted that multiple slabs add to compliance challenges. The government has indicated that these reforms are aligned with the vision for a next-generation GST framework.
Source PTI
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