Next-Gen GST: A Revenue Revolution?

The Centre proposes a new 'Next Gen GST' with a two-slab structure to boost revenue, addressing concerns about shared revenue with states. This involves eliminating 12% and 28% slabs, retaining 5% and 18%, and adding a 40% rate for a few goods. Enhanced consumption is expected to fuel revenue growth.

Devdiscourse News Desk | New Delhi | Updated: 18-08-2025 15:11 IST | Created: 18-08-2025 15:11 IST

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Country:
India

The Indian government has proposed a streamlined 'Next Gen GST' structure, aiming to redefine how revenue is shared between the Centre and states. Officials assert that this new approach, distinguished by a two-slab system, will drive long-term revenue growth through increased consumption.

Currently, the Goods and Services Tax (GST) consists of four tiers. These include tax rates of 5%, 12%, 18%, and 28%, covering everything from essential goods to luxury items. In a significant policy shift, the Centre suggests scrapping the 12% and 28% slabs, maintaining only the 5% and 18% rates, alongside a 40% rate for select products.

The Centre maintains a balanced revenue-sharing agreement with states, with 41% of its share allocated based on Finance Commission guidelines. Additionally, compensation cess collected from states substantially contributes to state finances. This proposal, while ambitious, is part of broader GST reforms intended to enhance tax buoyancy across the nation.

(With inputs from agencies.)