New Delhi: In a landmark move, the Group of Ministers (GoM) on GST has approved the Centre’s proposal to simplify India’s Goods and Services Tax (GST) structure, potentially bringing significant relief to citizens, small businesses, farmers, and the middle class.
The current four-tier GST system — with slabs of 5 percent, 12 percent, 18 percent, and 28 percent — is set to be streamlined into two main rates plus a special rate for harmful/luxury goods:
- 5 percent GST – for essential goods such as food items and daily necessities
- 18 percent GST – for standard goods and most services
- 40 percent GST – for harmful or ultra-luxury products such as tobacco, pan masala, and expensive cars
The proposal aims to simplify taxation, reduce confusion, and enhance transparency across the country.
Approval by GoM Led by Bihar Deputy CM
The six-member GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, endorsed the two-tier GST system. “We have agreed to a major reform in GST rates to make the tax structure easier for citizens and businesses alike,” Choudhary said.
Finance Minister’s Take
Union Finance Minister Nirmala Sitharaman welcomed the changes, stating, “This reform will benefit people and small businesses, making the GST system more user-friendly and transparent.”
Key Changes in GST Slabs
- Current system:
- 0–5 percent: Essential food items
- 12 percent & 18 percent: Most goods and services
- 28 percent + cess: Luxury and harmful products
- Proposed system:
- 5 percent GST – Essential goods
- 18 percent GST – Standard goods
- 40 percent GST – Harmful/ultra-luxury goods
Luxury and Harmful Goods Taxed Heavily
Uttar Pradesh Finance Minister Suresh Kumar Khanna said that ultra-luxury goods and harmful products like expensive cars, tobacco, and pan masala will face a 40 percent GST, ensuring that the move discourages consumption of unhealthy or extravagant items while generating revenue.
State-Level Concerns
West Bengal Finance Minister Chandrima Bhattacharya expressed that states might levy an additional charge on top of the 40 percent GST to maintain overall revenue from luxury products. She also highlighted the need to assess potential revenue impact on both the Centre and the states.
Why the Reform Matters
The proposed GST simplification is expected to:
- Reduce compliance burden for businesses, especially MSMEs
- Make tax rates easier to understand for citizens
- Ensure fair taxation of harmful and luxury goods
- Improve transparency and administration across states
