GST Rate Rationalisation: Towards a Two-Slab Structure
UPSC Relevance
Prelims: Indian Economy and Social Development (Fiscal Policy, Taxation, Goods and Services Tax - GST); Indian Polity and Governance (Constitutional Bodies - GST Council, Centre-State financial relations).
Key Highlights from the News
GST Council's Group of Ministers (GoM on Rate Rationalisation) approved the central government's proposal to reduce the GST structure to two main slabs.
The final decision on this recommendation will be made by the GST Council.
New Proposal: Eliminate the existing 12% and 28% slabs and retain two main slabs: 5% and 18%.
Accordingly, 99% of goods in the 12% slab will move to 5%, and 90% of goods in the 28% slab will move to 18%.
A new higher slab of 40% may be introduced for luxury items remaining in the 28% slab. The existing compensation cess may be removed.
States like Kerala raise concerns about the potential loss in revenue for the States due to these changes and demand a compensation mechanism.
The main objectives of this reform are to provide relief to common people and MSMEs, and to promote economic growth by increasing consumption.
COMMENTS