India Plans 2-Slab GST System by Diwali
The government has proposed reforms to simplify the Goods and Services Tax (GST) into a two-slab system, targeting implementation by Diwali to reduce the tax burden on everyday items and benefit small businesses.
Proposed Restructuring
The Finance Ministry has submitted a proposal to the Group of Ministers to consolidate the existing four-rate GST structure (5%, 12%, 18%, 28%) into two main slabs: a standard rate and a merit rate. Special rates would apply only to a limited number of essential or exempted goods and services.
Reform Objectives
The GST overhaul is built on three key pillars:
- Structural reform: Address inverted duty structure and classification issues to boost consistency and ease compliance.
- Rate rationalisation: Shift daily-use and aspirational goods to lower rates, improving affordability and stimulating consumer spending.
- Ease of living: Streamline processes like registration, filing, and refunds to help businesses, especially SMEs.
Policy Process and Timetable
The two-slab proposal is currently under review by the GST Council, which is expected to meet in September. The reforms are slated for launch ahead of Diwali, providing a festive tax relief targeted at the common man.
