A major restructuring of India’s indirect tax regime is on the anvil, with the Goods and Services Tax (GST) Council approving a simplified two-slab framework of 5 per cent and 18 per cent. Highly placed sources have informed that the decision would effectively abolish the 12 per cent and 28 per cent rates.
The move, finalised on the opening day of the Council’s 56th meeting on Wednesday, is being seen as one of the most significant changes since GST was rolled out in 2017. The two-day session is chaired by Union Finance Minister Nirmala Sitharaman and will continue on September 4.
According to trusted media reports, the Council has endorsed a cut in GST on footwear and apparel priced up to ₹2,500, which will now fall in the 5 per cent bracket. Sources said the new rates are expected to come into effect within weeks, in time for the festive season.
The Group of Ministers on rate rationalisation had earlier recommended that the existing four-rate structure be collapsed into just two, citing the need for simplicity and predictability in taxation.
Also read: GST Council meets to discuss rate cuts, rationalisation measures
Sources further indicated that health insurance premiums for senior citizens are likely to be exempted from GST, while other premiums could be shifted to a lower slab. In addition, the Council has reportedly agreed to reduce rates on life-saving medicines.
Micro, Small and Medium Enterprises (MSMEs) are also expected to see procedural relief, with the government working to reduce the registration timeline from several weeks to just three days.
The reform, however, has not been without contestation. Opposition-ruled states, including Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, West Bengal and Karnataka, have demanded compensation or concrete estimates to cover anticipated revenue losses. They argue that the new structure, while business-friendly, risks eroding the fiscal base of states already grappling with shortfalls.
The Council will resume deliberations on Wednesday to consider the compensation demand and finalise the implementation schedule.
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