Redefining India's GST: A New Two-Tier Tax Proposal
India's GST may shift to a two-tier structure, focusing on 5% and 18% rates, with a special 40% rate for select items. The proposed changes could enhance collection and streamline tax classifications, primarily keeping the 18% rate as the main revenue driver.
- Country:
- India
The Centre has proposed significant changes to India's Goods and Services Tax (GST) structure, aiming to simplify the current system. The plan suggests a shift from a four-tier to a two-tier tax system, retaining key rates at 5% and 18%. Additionally, a special 40% rate for certain goods is under consideration.
Currently, the 18% tax bracket is a crucial revenue generator, contributing 65% to the total GST collection. If the proposal is implemented, this rate will remain the dominant source of revenue, with potential growth driven by increased consumption and tax compliance.
The proposed restructure will eliminate the existing 12% and 28% slabs, categorizing goods into 'merit' and 'standard' classifications. Most items in the 12% bracket would move to 5%, while 90% of those in the 28% slab would transition to 18%. The change aims to enhance efficiency and revenue collection.
(With inputs from agencies.)
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