The Finance Ministry has said that the Central Government has sent its proposal on GST rate rationalisation and reforms to the Group of Ministers (GoM) constituted by the GST Council to examine this issue.
Key areas identified for next-generation reforms include the rationalisation of tax rates to benefit all sections of society, especially the common man, women, students, middle class, and farmers.
Reforms will also seek to reduce classification-related disputes, correcting inverted duty structures in specific sectors, ensuring greater rate stability, and further enhancing ease of doing business. These measures would strengthen key economic sectors, stimulate economic activity, and enable sectoral expansion.
Key Pillars of the Centre’s Proposed GST Reforms:
Pillar 1: Structural reforms:
1. Inverted duty structure correction: The correction of inverted duty structures to align input and output tax rates so that there is a reduction in the accumulation of input tax credit. This would support domestic value addition.
2. Resolving classification issues: Resolve classification issues to streamline rate structures, minimise disputes, simplify compliance processes, and ensure greater equity and consistency across sectors.
3. Stability and Predictability: Provide long-term clarity on rates and policy direction to build industry confidence and support better business planning.
Pillar 2: Rate Rationalisation:
1. Reduction of taxes on common: man items and aspirational goods: This would enhance affordability, boost consumption, and make essential and aspirational goods more accessible to a wider population.
2. Reduction of slabs: Essentially move towards simple tax with 2 slabs – standard and merit. Special rates only for select few items.
3. Compensation Cess: The end of compensation cess has created fiscal space, providing greater flexibility to rationalise and align tax rates within the GST framework for long-term sustainability.
Pillar 3: Ease of Living:
1. Registration: seamless, technology-driven, and time-bound, especially for small businesses and startups.
2. Return: Implement pre-filled returns, thus reducing manual intervention and eliminating mismatches.
3. Refund: Faster and automated processing of refunds for exporters and those with inverted duty structure.
As per various media reports 99 percent products vastly being placed under the 12 percent GST tax slab may shift to 5 tax bracket while 90 percent of items products being placed under the in 28 percent GST tax bracket may move in the 18 percent slab.
Products expected to be in 5 percent GST BraketÂ
• Tooth powder, toothpaste, soaps, hair oil
• Processed foods, snacks, frozen vegetables, condensed milk
• Mobiles, computers, sewing machines, pressure cookers, geysers
• Water filters (non-electric), irons, vacuum cleaners
• Ready-made garments above ₹1,000, footwear in ₹500–₹1,000 range
• Most vaccines, HIV/TB diagnostic kits, Ayurvedic medicines
• Bicycles, non-kerosene stoves, barbecues, cookware, utensils
• Exercise books, geometry boxes, maps, globes
• Glazed tiles, pre-fabricated buildings, vending machines
• Public transport vehicles (sold, not fares), agricultural machinery
• Solar water heaters
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Products expected to be in 18 percent GST BraketÂ
 Insurance (in some cases may drop to 0 per cent)
• Cement, ready-mix concrete
• TVs, refrigerators, washing machines, ACs
• Car and motorcycle seats, railway AC units
• Aerated water, dishwashers, aircraft for personal use
• Protein concentrates, sugar syrups, coffee concentrates
• Plastic products, rubber tyres, aluminium foil, tempered glass
• Printers, razors, manicure kits, dental floss
Finance Ministry has said that when GST Council meets next, it will deliberate on the recommendations of GoM, and every effort will be made to facilitate early implementation so that the intended benefits are substantially realised within the current financial year.