Context:
On 79th Independence Day, the Prime Minister of India announced a major restructuring of the Goods and Services Tax (GST) to be rolled out by Diwali 2025. The reform is aimed at simplifying tax slabs and reducing the burden on common citizens while enhancing economic growth.
About GST Revamp – Next-Gen Reform
- What It Is?
- A complete restructuring of the GST framework.
- Replaces the current multi-slab system with a simplified two-slab regime (5% & 18%), plus a special 40% rate for select goods.
- Objectives
- Reduce tax burden on essential and standard goods.
- Boost consumption and demand in the economy.
- Simplify compliance for MSMEs and small businesses.
- Stimulate long-term growth by creating a more predictable tax regime.
Proposed Features
- Two Core Rates:
- 5% → Merit goods & essential items.
- 18% → Standard goods & services.
- Special 40% Rate: For 7 items (tobacco, alcohol, pan masala, online betting, etc.).
- Slab Adjustments:
- 99% of current 12% slab items to move to 5%.
- ~90% of current 28% slab items to move to 18%.
- Zero Rate: Continued exemption for essential food items.
- Sectoral Considerations: Labour-intensive exports (e.g., diamonds) to retain present rates.
- GST Council Review: Proposal circulated to states & Group of Ministers (GoM) for final approval before rollout.
