GST Reforms: Simplifying India's Tax Structure

The finance ministry has proposed a streamlined two-slab structure for the Goods and Services Tax (GST) to the Group of Ministers (GoM), aiming to significantly ease the tax burden on everyday items. In addition to these slabs, special rates will be set for select goods, the government announced on Friday.

The Centre suggested classifying goods and services as 'standard' or 'merit' under the proposed system. Currently, GST operates under a four-tier structure with rates of 5%, 12%, 18%, and 28%, with critical items receiving lower or no taxes and luxury goods taxed higher. The proposed changes follow the recent end of the compensation cess regime.

Chaired by Finance Minister Nirmala Sitharaman, the GST Council plans to meet in September to evaluate the GoM's recommendations. The government's approach, unveiled on Independence Day by Prime Minister Narendra Modi, aims at providing a substantial Diwali gift through reduced tax rates that benefit small industries and promote economic stability.

(With inputs from agencies.)