A crucial meeting of the Group of Ministers (GoM) on GST rate rationalisation on Thursday ended with states agreeing to the Centre’s proposal to restructure the indirect tax system by reducing the number of slabs to two i.e. 5% and 18%.
The six-member GoM, chaired by Bihar Deputy Chief Minister Samrat Choudhary, accepted the plan to replace the current four-rate structure of 5, 12, 18, and 28 per cent with two rates — 5 per cent for merit goods and services and 18 per cent for standard items. A higher 40 per cent levy will remain on a small list of sin goods.
The panel has also recommended that luxury cars be taxed under the 40% slab.
Members of the GoM include Uttar Pradesh Finance Minister Suresh Kumar Khanna, Rajasthan Health Minister Gajendra Singh, West Bengal Finance Minister Chandrima Bhattacharya, Karnataka Revenue Minister Krishna Byre Gowda and Kerala Finance Minister K N Balagopal.
Finance Minister Nirmala Sitharaman, addressing the GoM earlier, said, “The rate rationalisation will provide greater relief to the common man, farmers, the middle class and MSMEs, while ensuring a simplified, transparent and growth-oriented tax regime.”
The move will see 99 per cent of items in the 12 per cent bracket reclassified to 5 per cent, while nearly 90 per cent of goods and services under the 28 per cent rate will shift to 18 per cent. The Centre has argued that the rejig will make GST simpler and broaden compliance.
The GoM also reviewed the Centre’s proposal to exempt GST on health and life insurance for individuals, which could lead to a revenue impact of around ₹9,700 crore annually. Most states supported the plan but underlined the need for a mechanism to ensure that insurers pass on the benefit to policyholders.
The GST Council is expected to take up the recommendations in its upcoming meeting for final approval.
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