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Key Points

The 56th GST Council meeting is underway in New Delhi chaired by Finance Minister Nirmala Sitharaman. The council is considering major reforms to simplify the GST structure by reducing four slabs to potentially two main rates. Nearly all items in the 12% slab may move to 5%, while most 28% items could shift to 18%, excluding sin goods. This comes after PM Modi's Independence Day hint about a "big reform of GST" as a Diwali gift for citizens.

Key Points: Sitharaman Chairs 56th GST Council Meet for Rate Rationalisation

  • Proposal to eliminate 12% and 28% GST slabs entirely
  • Most goods to move to either 5% or 18% tax brackets
  • Sin products to continue with higher 40% levy
  • Council to discuss short-term compensation for states
3 min read

56th GST Council meeting begins at New Delhi; rate rationalisation on agenda

FM Nirmala Sitharaman leads 56th GST Council meeting in Delhi to rationalise tax slabs, potentially merging 12% and 28% into 5% and 18% rates.

"people could expect a 'very big gift' during Diwali - PM Narendra Modi"

New Delhi, September 3

The 56th Goods and Services Tax (GST) Council meeting is underway in the national capital, led by Finance Minister Nirmala Sitharaman.

The two-day meeting, being held on September 3 and 4, is expected to bring significant changes to India's indirect tax structure, with discussions centred around rationalising and reducing the number of GST slabs.

According to government sources, the proposal under consideration aims to eliminate the 12 per cent and 28 per cent brackets. Instead, most goods would be placed under either a 5 per cent or an 18 per cent slab. At present, there are four GST rate slabs, which are 5 per cent, 12 per cent, 18 per cent, and 28 per cent.

Nearly 99 per cent of items currently taxed at 12 per cent are likely to be moved into the 5 per cent slab, while around 90 per cent of items in the 28 per cent category could shift to the 18 per cent slab. Goods considered "sin" products would continue to draw a higher 40 per cent levy.

As per the proposals approved by the Group of Ministers (GoM) last month, almost all items in the 28 per cent slab, barring sin goods, would move to the 18 per cent slab, and those in the 12 per cent slab would move to the 5 per cent slab. Another slab of 40 per cent would exist, which will be levied on 6 to 7 items, largely sin and demerit goods.

The relevance of the meeting grew after Prime Minister Narendra Modi, in his Independence Day address, hinted at a "big reform of GST," calling it a major step ahead of the festival season. He had said people could expect a "very big gift" during Diwali.

The Council is also likely to discuss a short-term compensation mechanism for states, which will lose revenue due to rate cuts. However, the compensation cess structure, as it exists today, is unlikely to be extended.

The compensation cess, introduced in July 2017, was designed to make up for state revenue losses during the initial five years of GST implementation. The GST (Compensation to States) Act, 2017, was enacted to ensure that the Centre should provide compensation to states for a period of five years from the implementation of GST on July 1, 2017, to make sure that each state's tax revenue grows by 14 per cent annually over the base year of 2015-16.

The Council's discussions are expected to continue tomorrow, with decisions likely to be announced after deliberations conclude.

- ANI

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Reader Comments

P
Priya S
Good move but what about essential items? Hope daily necessities like groceries and medicines don't become more expensive. The government should focus on making life affordable for common people.
A
Aditya G
As a CA, I welcome this simplification. The multiple slab system was creating confusion and compliance burden. Moving to 5% and 18% slabs makes perfect sense for a unified tax structure.
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Sarah B
Interesting development. The compensation mechanism for states is crucial - hope they find a balanced solution that doesn't burden either central or state finances. Federal cooperation is key for GST success.
Karthik V
Hope this brings actual relief to consumers and not just paperwork simplification. Last time when GST was introduced, many prices actually went up. Waiting to see the final impact on my monthly budget.
M
Meera T
Good that sin goods remain highly taxed. We need to discourage consumption of harmful products. The revenue from these can help compensate for lower taxes on essential items 👍

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