News Trigger
The Group of Ministers (GoM) on Rate Rationalisation has approved the Centre’s proposal for a two-rate GST structure. The recommendation now awaits GST Council approval.
Concept Corner
| Keyword | Explanation |
| GST (Goods and Services Tax) | Indirect tax introduced in 2017 replacing multiple indirect taxes; a destination-based tax. |
| GST Council | Apex body (Union Finance Minister + State FMs) that decides GST rates, exemptions, and reforms. |
| GoM (Group of Ministers) | Committee of State Ministers formed to give recommendations on specific GST issues. |
| Rate Rationalisation | Simplifying tax slabs to reduce complexity and classification disputes. |
| Compensation to States | Mechanism where Centre compensates States for loss of revenue due to GST introduction (ended in 2022, but demand for extension continues). |
Core Highlights
- Proposal: End 12% and 28% GST slabs; retain only 5% and 18% slabs.
- Reallocation of Goods:
- 99% of items in 12% slab → shifted to 5%.
- 90% of items in 28% slab → shifted to 18%.
- Remaining items in 28% slab → moved to new 40% slab (luxury/sin goods).
- Impact: Relief for households and MSMEs as many essential goods become cheaper.
- Revenue Concerns: States worry about loss of revenue → demand for compensation mechanism.
- Broader Significance: Seen as a step towards “Next-Generation GST Reforms,” aiming at growth, inclusion, and boosting consumption.
Recent Developments
- PM Modi announced “Next-gen GST reforms” as a Deepavali gift.
- Industry experts note:
- Could boost consumption-driven growth.
- Needs careful balancing to ensure revenue neutrality and avoid inflationary risks.
- GST Council meeting expected in September for final decision.
Practice Question (Prelims Style)
With reference to GST in India, consider the following statements:
- The GST Council is chaired by the Union Finance Minister and includes Finance Ministers of all States.
- The Constitution explicitly prescribes the number of GST slabs that can exist.
- Rate rationalisation aims to simplify the tax system and reduce classification disputes.
Which of the above statements is/are correct?
(a) 1 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
