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Key Points

The Modi government has proposed a major GST overhaul, eliminating the 12% and 28% slabs in favor of 5% and 18% rates. Most consumer goods will see reduced taxation, while sin goods like tobacco will attract a new 40% slab. PM Modi hinted at this reform during his Independence Day speech, calling it a Diwali gift for citizens. The proposal has been sent to states and the GST Council for review ahead of a potential September-October meeting.

Key Points: Modi Govt Proposes Scrapping 12% and 28% GST Slabs for 5% and 18%

  • GST overhaul to shift 99% of 12% slab items to 5% rate
  • 90% of 28% slab items to move to 18% rate
  • New 40% slab proposed for tobacco and pan masala
  • Modi hints at Diwali gift with simplified tax structure
3 min read

Centre proposes scrapping of 12% and 28% GST slabs, most items to move to 5%, 18% rates: Government sources

Centre plans major GST overhaul with most items shifting to 5% and 18% rates, while sin goods face 40% tax.

"This Diwali, you fellow countrymen are going to get a very big gift. – PM Narendra Modi"

New Delhi, August 15

In a path-breaking initiative relating to the Goods and Services Tax structure, the Central Government has proposed to scrap the current slab of 12 per cent and 28 per cent of GST rates and keep only 5 per cent and 18 per cent GST rates, government sources said on Friday.

Government sources said as part of the initiative, 99 per cent of 12 per cent slab are proposed to move in 5 per cent slab and 90 per cent of items in 28 per cent slab are proposed to move in the 18 per cent slab.

They said that consumer goods kept in the 28 per cent slab are proposed to be moved to the 18 per cent slab. They also said that a new slab of 40 per cent is proposed for "sin goods" like tobbacco and pan masala.

The initiative is in line with Prime Minister Narendra Modi's announcement during his Indepedendence Day Speech on Friday that people are going to get a very big gift on Diwali and the government has embarked on "big reform of GST".

The sources said that the proposal by the Centre has been sent to the states. It has also been sent to the Group of Ministers (GoM) of the GST Council.

The sources said that the proposal will be studied by the GoM and a meeting of the GST Council is likely to be held in September-October to consider the proposal.

PM Modi made a major announcement in the Independence Day address relating to GST.

"This Diwali, I am going to make it a double Diwali for you. This Diwali, you fellow countrymen are going to get a very big gift. In the last 8 years, we have done a big reform of GST, reduced the tax burden across the country, simplified the tax regime and after 8 years, the need of the hour is that we should review it once. We started the review by setting up a high-power committee and also held discussions with the states," PM Modi said from the ramparts of the Red Fort.

"We are coming with the next generation of GST reforms, this will be a gift for you this Diwali, taxes needed by the common man will be reduced substantially, a lot of facilities will be increased. Our MSMEs, our small entrepreneurs, will get a huge benefit. Everyday items will become very cheap and that will also give a new boost to the economy," he added.

- ANI

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Reader Comments

A
Ananya R
Good move but implementation is key. Last time when GST was introduced, small businesses suffered due to complex compliance. Hope this simplification actually helps MSMEs!
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Sarah B
As an expat in India, I've always found GST confusing. Reducing slabs from 5 to 2 (plus sin tax) makes so much sense! Will make pricing more transparent for consumers.
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Vikram M
40% on sin goods is a smart move. Pan masala and tobacco cause so much health damage, the higher tax is justified. Maybe some of that revenue can fund healthcare initiatives?
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Kavya N
Waiting to see which items actually make it to lower slabs. Last time many essential goods remained in higher brackets. Hope this isn't just pre-election gimmick!
M
Michael C
Interesting economic strategy - simplifying tax structure while keeping luxury/sin taxes high. Similar to many Western models. Could boost both consumption and tax compliance.

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