GST Overhaul: Big Reforms for Diwali Unveiled by Government

In a significant move, the Indian Government plans to revamp the GST structure by eliminating 12% and 28% slabs and proposing 5%, 18%, and a new 40% slab for 'sin goods.' Announced during PM Modi's Independence Day speech, this 'Diwali gift' aims to ease tax burdens and boost the economy.

In an unprecedented initiative to reform the Goods and Services Tax (GST) framework, the Central Government has suggested the elimination of the 12 percent and 28 percent tax slabs, favoring a simplified structure with only 5 percent and 18 percent GST rates, according to government sources on Friday.

The proposal suggests that 99 percent of items in the 12 percent slab shift to the 5 percent slab, while 90 percent of goods in the 28 percent category move to the 18 percent slab. Those left in the 28 percent slab, mainly consumer goods, will transition to the 18 percent tier. Additionally, a new 40 percent slab is proposed for 'sin goods' such as tobacco and pan masala.

This initiative aligns with Prime Minister Narendra Modi's Independence Day announcement promising significant reforms as a 'Diwali gift.' The proposal has already been forwarded to the states and the GST Council's Group of Ministers (GoM) for consideration, with discussions likely to occur by October.

(With inputs from agencies.)