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The central government has sent a major proposal for new GST slabs, under which it is planned to reduce the existing four slabs to just two rates — 5% and 18%. This proposal has been sent to the Rate Rationalization GoM and the state governments.
The government has suggested that GST rates on goods related to the common man, farmers, students and the middle class be reduced from 18% to 5% or brought into the GST-free category. There is also a proposal to reduce GST rates on farmers’ tools, handicrafts, livelihood enhancing products in villages, some medicines and insurance services.
99% of the items falling in the current 12% slab will be brought into the 5% category. Similarly, 90% of the items falling in the 28% slab will be shifted to the 18% category. It has been recommended to impose 40% GST on only 5-7 items like tobacco, pan masala etc., so that the consumption of items having harmful effects on health can be reduced.
The government aims to implement the new GST structure before the festive season, especially Diwali. In this regard, the GST Council meeting is likely to be held in September or October, in which detailed discussions will be held with the states.
This proposal is expected to provide relief to the common people as most of the household items will be cheaper, while revenue will also increase by imposing higher taxes on hobby and harmful items.
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