New Delhi: Finance Minister Nirmala Sitharaman will address a key meeting of state finance ministers on Wednesday to push the Centre’s proposal for sweeping Goods and Services Tax (GST) reforms that promise lower rates and reduced prices of common-use items.
The Centre has suggested a simplified two-slab GST structure of 5 and 18 per cent, along with a 40 per cent special rate for a few demerit goods. The proposal seeks to remove the current 12 per cent and 28 per cent slabs, a move that will be deliberated by the Group of Ministers (GoM) on GST rate rationalisation at its two-day meeting in the national capital on August 20-21.
“The idea is to present the Centre’s rationale behind the reform proposal. Although the Centre is not a GoM member, the Union Finance Minister’s presence will help states better understand the thought process,” a source told.
Bihar Deputy Chief Minister Samrat Choudhary convenes the six-member GoM, which includes 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.
According to the Centre’s plan, items would be classified into ‘merit’ and ‘standard’ categories. The guiding principle, officials said, is to ease the tax burden on the middle class, MSMEs, and the farm sector. The 40 per cent slab, the highest permissible under GST law, would be reserved for about 5–7 demerit items such as pan masala, tobacco, and online gaming.
Currently, GST is levied at four main rates—5, 12, 18, and 28 per cent. Food and essential goods fall under the nil or 5 per cent bracket, while luxury and sin goods are taxed at 28 per cent with additional cess.
If the GoM agrees, the Centre’s proposal will be taken up by the GST Council, chaired by Sitharaman, in its next meeting. As per the plan, 99 per cent of goods under the 12 per cent slab would shift to 5 per cent, while 90 per cent of items and services in the 28 per cent category would move to the 18 per cent bracket.
