India Approves Simplified GST Structure with 5%, 18%, and 40% Slabs

In a significant development, India's goods and services tax (GST) structure is poised for simplification. A group of ministers (GoM) has unanimously accepted the Centre's proposal to move to a two-slab GST system, with rates of 5% and 18%. Additionally, a special 40% levy will be introduced for sin goods and ultra-luxury products.

The GST Council, the apex decision-making body for the tax, is now expected to meet in the first week of September, earlier than the previously planned second half of the month. This accelerated timeline aims to ensure the implementation of the reforms in time for the upcoming Diwali festival.

While the states have welcomed the move, they have also expressed concerns about the potential revenue loss due to the changes. The Department of Revenue will conduct an assessment of the revenue impact, which will be presented to the GST Council. Some states have suggested amending the GST law to allow for the imposition of a levy above the 40% rate, in order to maintain overall tax rates on these products once the compensation cess ends.

The simplification of the GST structure is seen as a significant step towards next-generation reforms in India's eight-year-old indirect tax regime. The revamped system is expected to lower prices, boost consumption, and drive economic growth amid global economic uncertainty.