GoM Backs Scrapping 12% and 28% GST Slabs
The Group of Ministers (GoM) on GST rate rationalisation has approved the Centre’s proposal to simplify the goods and services tax system. The panel has recommended scrapping the 12% and 28% slabs and consolidating the structure into just two major rates — 5% for essential and merit goods and 18% for standard items.
Shift of Goods Across Slabs
According to the recommendation, almost 99% of items in the 12% category will move to the lower 5% bracket, giving relief to households and small businesses. Meanwhile, about 90% of goods currently taxed at 28% will be brought down to 18%, reducing the burden on consumers. However, a higher 40% rate will remain for certain “sin goods” such as luxury cars, aerated drinks, and tobacco products.
Insurance Exemptions Proposed
In another significant move, the GoM suggested exempting health and life insurance premiums for individuals from GST. This is expected to make insurance more affordable and widen coverage, though the government has yet to release an estimate of the potential revenue impact.
GST Council to Take Final Call
The recommendations will now be placed before the GST Council, which comprises Union Finance Minister Nirmala Sitharaman and state finance ministers. The council is expected to meet before Diwali to decide on adopting the changes and rolling them out as part of the government’s broader “GST 2.0” reform initiative.
Economic Impact Expected
Experts say the new structure could lower the prices of household goods, consumer electronics, and automobiles, providing a direct boost to consumption. While the reforms may reduce tax revenue in the short term, the government hopes that stronger demand will balance fiscal pressures by accelerating growth.
