Finance Ministry proposes two-level GST rate structure, tax burden will decrease, know details
The Finance Ministry on Friday proposed a two-tier GST rate structure to a Cabinet Committee (Group of Ministers), which includes special rates on a few select items. This step is part of the government’s “Next Generation” GST reform scheme, which aims to reduce tax burden on everyday use items in this financial year. According to PTI news, the Center has suggested to a committee of state finance ministers to divide the GST system into only two slabs- ‘Standard’ and ‘Merit’. In addition, special rates will also be applied to certain items, which will be clearly defined. In the Independence Day speech, Prime Minister Narendra Modi announced the ‘Next Generation’ GST reform, which assured the tax burden with benefits to small industries.
Currently, there is a four -level GST system
Currently, there is a four-level tax system of GST- 5%, 12%, 18%, and 28%, in which essential commodities are taxed at tax-free or lower rates, while luxury and harmful items apply the highest GST rate. Additional compensation cess is also applied on these items. The compensation cess is ending on 31 March 2026, after which the GST Council will have to plan for new tax determination on these items.
The GST Council, which is chaired by Finance Minister Nirmala Sitharaman, will discuss the proposal in September. The Finance Ministry has said that efforts will be made to implement this proposal as soon as possible so that its benefits can reach the common people during the financial year.
Improvement will be based on three main columns
The Finance Ministry says that this improvement will be based on three main columns – structural reforms, adjustment of rates and ease in life. It includes taxes cut on common goods and aspirations, decreasing the number of slabs to fix two simple rates, and special rates on some items, which will help increase consumption and increase the availability of goods. Reforms will reduce the disputed situations related to tax classification, reversed the structure will be cured, tax rates will be stable, and a better environment for trade. This will strengthen various sectors of the economy and boost development.
GST registration and return filing will be easier
GST registration and return filing for small businesses and startups will be made easier under technical reforms. The refund process will be intensified and automated in exporters and inverted tax cases. The Finance Ministry said that financial resources have increased due to the end of compensation cess, increasing the ability to restore GST rates. The central government is working with the states to implement this reform under collaborative federalism.
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