New Delhi: The GST Council, in its latest meeting, is considering a major relief for consumers by bringing everyday items like shoes and clothes priced up to Rs 2,500 under the lowest GST slab of 5 per cent, sources told IANS. This move aims to make commonly purchased goods more affordable for people.
This change will expand the 5 per cent GST slab to cover more items. At present, only goods priced up to Rs 1,000 are taxed at 5 per cent, while anything above that falls under the higher 12 per cent slab.
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The GST Council, chaired by Finance Minister Nirmala Sitharaman and attended by state finance ministers, on Wednesday approved a simplified GST structure with just two main slabs—5 per cent and 18 per cent. However, sin goods like cigarettes, tobacco, sugary drinks, and certain luxury items will continue to attract the highest tax slab of 40%, aimed at high-income consumers.
With items from the 12 per cent and 28 per cent brackets now moved to the 5 per cent and 18 per cent slabs, GST has been simplified from four tax rates to just two. This shift is expected to lower the prices of several consumer goods, boost demand, and give a push to overall economic growth.
India introduced a 4-tier GST system on July 1, 2017, with tax rates of 5 per cent, 12 per cent, 18 per cent, and 28 per cent. At that time, the Centre and states agreed to merge most taxes such as excise duty and VAT into one unified tax. To cover revenue losses for states, a compensation cess—ranging from 1 per cent to as high as 290 per cent—was added on luxury and demerit goods.
However, the compensation mechanism was for the initial 5 years ending June 2022.
Prime Minister Narendra Modi had stated in his Independence Day speech that the Central government is proposing significant reforms in GST, focused on 3 pillars of structural reforms, rate rationalisation, and ease of living.
The key areas identified for next-generation reforms include rationalisation of tax rates to benefit all sections of society, especially the common man, women, students, middle class, and farmers. The reforms will also seek to reduce classification-related disputes, correct the inverted duty structures in specific sectors, ensure greater rate stability, and further enhance ease of doing business.
GST reforms would strengthen key economic sectors, stimulate economic activity, and enable sectoral expansion, PM Modi said. (With IANS Inputs)
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