In a significant move toward simplification of the Goods and Services Tax (GST) structure, the Group of Ministers (GoM) has approved the scrapping of the 12% and 28% tax slabs. This decision is part of the much-anticipated GST 2.0 reforms aimed at streamlining the tax regime, reducing complexities for businesses and consumers, and promoting economic growth.
Under the new framework, GST slabs will be reduced to just two main rates: 5% and 18%. The removal of the intermediate 12% and the highest 28% slabs is expected to lower tax burdens on various goods and services, potentially leading to reduced prices for consumers. However, certain items such as tobacco products and luxury goods may continue to attract higher or specific rates under separate cesses or duties.
While this reform is being welcomed by taxpayers and industry experts as a step toward ease of doing business, some states have expressed concern about potential revenue losses due to lower tax collections from these slabs. The central government is currently exploring measures to address these concerns and ensure that states’ fiscal stability is maintained.
The GoM’s decision marks a pivotal phase in India’s indirect tax landscape, with the proposed changes expected to come into effect in the coming months after final legislative approvals. The success of these reforms will largely depend on balancing tax simplification with sustained revenue generation for both the Union and state governments.