GST Council Approves Major Overhaul, Adopts 5% and 18% Tax Slabs
The GST Council on Wednesday approved a significant overhaul of the Goods and Services Tax regime, clearing a dual tax rate structure of 5% and 18% while eliminating the existing 12% and 28% slabs. The decision was made on the first day of a two-day meeting chaired by Union Finance Minister Nirmala Sitharaman.
According to highly placed sources, the move aims to streamline the tax system, a proposal that had been endorsed earlier by a Group of Ministers. The new rates are expected to be implemented within the next few weeks, ahead of the upcoming festive season, providing a potential boost to consumer spending.
In another key decision, the Council reportedly approved a reduction in the tax rate on footwear and apparel priced up to Rs 2,500, bringing it down to 5%. This is expected to make these essential items more affordable for a large segment of the population.
The apex tax body is also considering further relief measures for taxpayers. Sources indicated that the Council is likely to exempt health insurance premiums for senior citizens from GST entirely and may reduce rates on critical life-saving drugs. There is also a possibility that health insurance premiums for all consumers could be shifted to a lower tax slab.
For the business community, particularly Micro, Small & Medium Enterprises (MSMEs), the government is planning to simplify compliance. A proposal is being considered to drastically reduce the GST registration timeline to just three days, a significant improvement from the current process which can take several weeks.
However, the proposed changes were met with demands for fiscal support from several opposition-ruled states. Eight states—Himachal Pradesh, Jharkhand, Kerala, Punjab, Tamil Nadu, Telangana, West Bengal, and Karnataka—have pressed the Centre for compensation to offset potential revenue losses resulting from the rate rationalization, or at least detailed estimates of the likely revenue impact. The meeting is set to conclude on September 4.
