TV
In a major step towards simplifying India’s tax regime, the Group of Ministers (GoM) on GST rate rationalisation has approved a plan to reduce the four-tier tax structure to just two slabs - 5% and 18%. This decision is being hailed as the beginning of GST 2.0, aimed at easing compliance for businesses and reducing the tax burden on households.
Simpler Structure, Fewer Slabs
Currently, GST is levied at 5%, 12%, 18%, and 28%. Under the new system, the 12% and 28% slabs will be scrapped, while a 40% rate will remain for “sin goods” like tobacco and luxury items. Nearly 99% of goods taxed at 12% will now fall under the 5% slab, while 90% of items from the 28% slab will shift down to 18%.
Savings for Households
The new structure is expected to bring significant relief to families and small businesses. Everyday essentials such as medicines, processed food, clothing, footwear, and household products will be cheaper, moving to the 5% slab. Items like large appliances, televisions, and other durables will now be taxed at 18%, making them more affordable for middle-class buyers.
Insurance May Become GST-Free
The GoM also discussed exempting health and life insurance premiums from GST, a move that could save policyholders annually, though states emphasized ensuring insurers pass on the benefit to customers.
Next Steps
The recommendations will be placed before the GST Council, chaired by Finance Minister Nirmala Sitharaman, in its upcoming meeting. If approved, the reform would mark one of the biggest changes to GST since its launch in 2017, paving the way for a simpler, growth-driven tax regime.
