In today’s meeting, the Goods, Services Tax Council, led by Finance Minister Nirmala Sitharaman, will discuss a shift to a two-slab system anticipated to lessen the costs of daily items by rationalising and reducing the brackets under which most goods are taxed.
Below Are the Updates
Recommendations on rate rationalisation, which Prime Minister Narendra Modi called ‘next-generation’ reforms, will be discussed by the council, which includes state and UT finance ministers, along that there will be a discussion on compensation cess and health and life insurance.
A new taxation structure has been proposed, featuring two different rates: five per cent and eighteen per cent. Goods will be categorised as either merit or standard, with the lower rate applied to those classified as standard.
The current system has four slabs: five, 12, 18, and 28 per cent. The 90% goods will be under the 18% bracket, which at present is under the 28% category, and drop a chunk from the 12 per cent to the five per cent slab, the government plans. From this, the middle-class consumption will surge and offset the Rs 50,000 crore expected revenue loss.
Also, on life and health insurance premiums, there will be a proposal for exemption from the GST structure. Currently, there is an 18% tax on these.
The impact of Donald Trump’s 50 per cent tariff is expected to be partly offset by the rationalisation. Nearly $48 billion in Indian-made goods being sent to the US may be affected by the levies affecting Indian businesses and jobs.
The revision in the GST and the resultant spending boost economic growth, is expected by the government, after a big thumbs-up from global ratings agency Standard and Poor. There is a 7.8 per cent rise in GDP in the first quarter of this financial year, i.e., FY26, against a 6.5 per cent estimate, the government specified.
Consumption can surge by Rs 5.31 lakh crore, equal to around 1.6 per cent of GDP, from the GST reforms, along with income tax cuts, recommended by the SBI Research report.
On the foundation of three pillars – structural reforms, rate rationalisation, and ease of living – in line with its push to make India ‘aatmanirbhar’, or ‘self-reliant’, the reform has been made, continuing its journey to become the world’s third-largest economy.
Opposition-ruled states have expressed scepticism about the proposed GST changes, citing concerns over potential revenue loss and asking for compensation for anticipated losses. 8 state finance ministers, including those from Tamil Nadu, Punjab, and Bengal, will make presentations to the council.
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An additional duty on sin and luxury goods, besides the proposed 40% has been suggested from the proposal of the government for balancing rate rationalisation and revenue neutrality. Among the states, the proceeds from the same can be shared, they expressed.
