Finance Ministry Outlines GST Simplification Plan With Focus On Rate Cuts

Prime Minister Narendra Modi, in his 79th Independence Day address, announced that GST reforms aimed at substantially reducing the tax burden and benefiting small industries will be implemented by Diwali.

Following the announcement, the finance ministry revealed that it has presented a two-slab GST rate proposal to the Group of Ministers (GoM), along with special rates for select items. The proposal is built on three key pillars - structural reforms, rate rationalisation, and ease of living. It includes lowering taxes on essential goods for the common man as well as on certain aspirational products.

The Centre has suggested replacing the current 4-tier GST system of 5%, 12%, 18% and 28% with a simplified two-rate structure - standard and merit - while reserving special rates only for a limited set of items.

The GST Council, chaired by Finance Minister Nirmala Sitharaman and comprising state finance ministers, is scheduled to meet in September to deliberate on the GoM's rate rationalisation proposal.

According to the ministry, the expiry of the compensation cess has opened up fiscal space, allowing more flexibility to align and rationalise tax rates within the GST framework, ensuring its long-term sustainability.