Finance Ministry proposes 2-tier GST structure, special rates on select items

The finance ministry on Friday said it has proposed a twoslab GST rate structure to the Group of Ministers GoM along with special rates for select few items as the government looks to unveil next generation GST reforms in the current financial year which will lower tax burden on daily use items reported news agency PTIThe Centre has proposed to a panel of state finance ministers that the Goods and Services tax GST regime should have just two slabs where goods and services can be classified as standard and merit Also special rates can be levied on select items which will be specifiedCurrently GST is a fourtier tax structure of 5 12 18 and 28 per cent where essential items are either exempted or taxed at the lower tax bracket while demerit and luxury items at the highest slab Besides a compensation cess is levied at varied rates on demerit and luxury items like pan masala and cars reported PTIWith the compensation cess regime coming to an end on March 31 2026 the GST Council will also have to work out a mechanism regarding the rates of tax that can be levied on goods which currently attract compensation cessThe GST Council chaired by Finance minister Nirmala Sitharaman and comprising state ministers is expected to meet in September to discuss the GoM proposal on rate rationalisationThe GST Council in its next meeting will deliberate on the recommendations of GoM and every effort will be made to facilitate early implementation so that the intended benefits are substantially realised within the current financial year the finance ministry said while unveiling its proposal which has been submitted to the rate rationalisation GoM reported PTIPrime Minister Narendra Modi in his address to the nation on 79th Independence Day announced that next generation GST reforms which will lower tax burden substantially and benefit small industries is in the works and the lower taxes will be a Diwali gift to citizensSoon after the announcement the finance ministry said the Centre has shared its proposal on GST to the GoM which rests on three pillars structural reforms rate rationalisation and ease of livingCentres proposal includes reduction of taxes on common man items and aspirational goods and a reduction in GST slabs by moving towards a simple tax with two slabs and special rates on select few items This would boost consumption and enhance affordability reported PTIThe GST reforms will also seek to reduce classificationrelated disputes correcting inverted duty structures in specific sectors ensuring greater rate stability and further enhancing ease of doing business These measures would strengthen key economic sectors stimulate economic activity and enable sectoral expansionThe structural reforms would ensure stability and predictability by providing longterm clarity on rates and policy direction to build industry confidence and support better business planning reported PTIOn the ease of living side the finance ministrys proposal include seamless technology driven GST registration especially for small businesses and startups It also suggested implementation of prefilled GST returns and faster and automated processing of refunds for exporters and those with inverted duty structureThe ministry said the end of compensation cess has created fiscal space providing greater flexibility to rationalise and align tax rates within the GST framework for longterm sustainabilityThe ministry said in the true spirit of cooperative federalism the Centre remains committed to working closely with the statesIt will be building a broadbased consensus with the states in the coming weeks to implement the next generation of reforms the finance ministry said reported PTIThe government reaffirms its commitment to evolving the GST into a simple stable and transparent tax system one that supports inclusive growth strengthens formal economy and enhances Ease of Doing Business EoDB across the countryBihar Deputy Chief Minister Samrat Chaudhary is the convenor of the sevenmember stateministerial panel or Group of Ministers GoM on GST rate rationalisation The panel has been tasked with suggesting rate rationalisation and correction of inverted duty structure with an objective of simplifying the rate structure reviewing the GST exemption list and enhancing revenues reported PTIThe GoM was originally set up in September 2021 under then Karnataka Chief Minister Basavaraj Bommai Under his chairmanship the panel had submitted an interim report to the GST Council in June 2022 proposing changes in tax rates for some goods and services to rationalise the levyWith inputs from PTI