The government is moving towards a major simplification of the Goods and Services Tax (GST) system. In a recent Group of Ministers (GoM) meeting, a consensus was reached to reduce the existing four-slab structure to just two slabs. This means the 12% and 28% slabs will be abolished, while only 5% and 18% rates will continue.

Two-Slab Structure Finalised

The six-member GoM, chaired by Bihar Deputy CM Samrat Chaudhary, has recommended that:

• 5% GST will apply to essential and common goods.

• 18% GST will apply to most standard goods and services.

• A 40% tax slab will remain for luxury items and demerit goods.

This restructuring is expected to make the tax framework simpler and more transparent.

Impact of the New Slabs

• Around 99% of items earlier taxed at 12% will now move to the 5% slab, reducing costs for consumers.

• Nearly 90% of items under the 28% slab will now fall under 18%, benefiting traders and manufacturers.

• Luxury cars and harmful goods will continue to be taxed at the highest 40% slab.

Finance ministers from Uttar Pradesh, Rajasthan, West Bengal, Karnataka, and Kerala also supported the proposal, stating it would improve compliance and expand the tax base.

Centre’s Stand

Finance Minister Nirmala Sitharaman welcomed the GoM’s decision, stressing that the rationalisation will benefit the common public by lowering prices on several goods. She added that the simpler, clearer structure will not only bring transparency but also strengthen revenue collection.