New Delhi [India]: In a path-breaking initiative to simplify the Goods and Services Tax (GST) structure, the Central Government has proposed to scrap the current 12 per cent and 28 per cent GST slabs, retaining only the 5 per cent and 18 per cent rates, government sources said.
As part of the proposal, 99 per cent of items under the 12 per cent slab are likely to be shifted to the 5 per cent category, while nearly 90 per cent of items in the 28 per cent slab are expected to move to the 18 per cent rate. Consumer goods that are currently taxed at 28 per cent will also be shifted to the lower 18 per cent slab.
In addition, the Centre has proposed the creation of a new 40 per cent slab for “sin goods” such as tobacco and pan masala. Sources said the proposal has been shared with the states as well as the Group of Ministers (GoM) of the GST Council. The GoM will study the recommendations, and a meeting of the GST Council is likely to be held in September–October to consider the reforms.
The initiative follows Prime Minister Narendra Modi’s Independence Day announcement from the ramparts of the Red Fort, where he promised citizens a “very big gift” this Diwali in the form of sweeping GST reforms.
“This Diwali, I am going to make it a double Diwali for you. You are going to get a very big gift. In the last eight years, we have reduced the tax burden across the country, simplified the tax regime, and now the need of the hour is to review it once more,” PM Modi said.
He added, “We are coming with the next generation of GST reforms. Taxes needed by the common man will be reduced substantially, facilities will be increased, MSMEs and small entrepreneurs will benefit, everyday items will become cheaper, and the economy will get a fresh boost.”
The Prime Minister’s announcement has drawn widespread praise from industry leaders and the business community. Pankaj Mohindroo, Chairman of the India Cellular & Electronics Association (ICEA), said, “GST was an extraordinary reform. While in some areas like mobile phones and electronics the tax burden went up, this rationalisation into fewer slabs is very much needed. GST reforms will put more money in the pockets of consumers, stimulate demand, and be good for both industry and consumers.”
Economist Ved Jain echoed similar views, noting that after eight years of GST, the government now has enough data and experience to streamline the system. “Initially, GST was introduced with four slabs—6%, 12%, 18%, and 28%—to balance uncertainties in collections. Now, the time has come for structural reform. A standard rate and a demerit rate will make the system far more efficient,” he said.
Business leaders also welcomed the move for its potential impact on small traders and the retail sector. Ranjeet Mehta, CEO & Secretary General of PHDCCI, said the reforms expected by October would benefit the country in the coming years. BJP MP and Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal added that reducing GST on daily-use items and simplifying tax slabs will greatly help MSMEs and traders, while giving the economy a timely push ahead of the festive season.
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