Panel Approves Major GST Revamp
The Goods and Services Tax (GST) system is heading for its biggest overhaul since its introduction, as a Group of Ministers (GoM) has approved a plan to scrap two of the four current tax slabs. The move is aimed at simplifying the tax structure and is expected to make a wide range of goods and services cheaper for consumers.
New Two-Slab System
Under the proposed new structure, the existing 12% and 28% GST slabs will be eliminated. Most goods and services will now fall under two primary rates: 5% and 18%. This change is designed to bring significant relief to households. Nearly 99% of items currently taxed at 12% are expected to move down to the 5% slab. Similarly, almost 90% of items in the highest 28% bracket will shift to the 18% slab.
This means everyday items like medicines, processed food, and clothing could become cheaper. Large household appliances and televisions will also see a price reduction. A higher 40% levy will be reserved for a small list of "sin goods" like tobacco, with the panel also recommending that luxury cars be included in this top bracket.
Insurance Exemption and Next Steps
The GoM also discussed a proposal to make health and life insurance GST-free for individuals. While most states supported the idea, they have asked for a mechanism to ensure that insurance companies pass the benefits on to the policyholders.
These recommendations will now be presented to the GST Council, which is headed by the Union Finance Minister and includes representatives from all states. If the council gives its final approval, it will mark a new, simpler phase for India's tax system, easing the burden on both businesses and consumers.
