GST Simplification Plan: 12% & 28% Slabs May Be Removed
By shruti lashkari 2025-08-22 00:18:33
Proposal to Remove 12% and 28% GST Slabs Gains Support, Tax Structure May Be Simplified
In a major move towards simplifying India’s tax system, a proposal to abolish the 12% and 28% GST slabs has received support from a Group of Ministers (GoM). If implemented, the GST structure would largely be streamlined into two main slabs—5% and 18%.
The proposal was discussed in a recent GoM meeting, where state finance ministers agreed in principle to rationalize the current four-tier GST system. The panel, headed by Samrat Chaudhary, recommended reducing the slabs to make the system more efficient and easier to comply with.
Two-slab system in focus
Under the proposed structure, essential goods would be taxed at 5%, while most standard goods and services would fall under the 18% bracket. However, luxury and sin goods may continue to attract a higher tax rate of around 40%.
According to estimates, nearly 99% of items currently taxed at 12% could be moved to the 5% slab, while around 90% of goods in the 28% category may be shifted to 18%. This restructuring is expected to simplify taxation and reduce confusion for both consumers and businesses.
Luxury goods to remain highly taxed
The GoM has also suggested retaining a higher tax rate of 40% for luxury cars and certain demerit goods. Finance ministers from several states, including Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala, have backed the proposal, stating that it would improve transparency and potentially expand the taxpayer base.
Government’s stance
Union Finance Minister Nirmala Sitharaman emphasized that rationalizing GST rates would benefit the general public by making the tax system more transparent and efficient. She noted that lowering tax rates on several items could help reduce prices and provide relief to consumers.
If approved, the proposed changes could mark one of the most significant overhauls of the GST framework since its introduction, aiming to boost compliance, ease of doing business, and overall economic efficiency.
