*GST 2.0: 12% and 28% Slabs Likely to be Merged, Sin Goods May Attract 40% Levy*
In a significant move towards *simplifying India’s Goods and Services Tax (GST)* structure, the Centre has circulated a blueprint for *GST 2.0*, proposing the merger of the *12% and 28% slabs*. The new plan suggests *two principal slabs of 5% and 18%*, while sin goods such as tobacco, aerated drinks, and luxury items may attract a 40% levy.
The revamp aims to *make GST simpler*, reduce classification disputes, and ease compliance for both businesses and consumers. The proposal will be discussed by the Group of State Finance Ministers (GoM) in the upcoming GST Council meeting.
*Key Highlights of the Proposed GST Reform*
*Simplification of Rates:*
➤ Essential items like food, medicines, medical devices, and education-related goods may be placed in the nil or 5% slab.
➤ Most mass-use items currently under 12% may shift to 5% or 18%.
➤ Middle-class items such as ACs, TVs, refrigerators, and cement may move into the 18% slab.
*End of 12% and 28% Slabs:*
➤ 12% slab items include jams, fruit juices, namkeens, spectacles, medical items, notebooks, and bicycles.
➤ 28% slab items include air-conditioners, dishwashers, automobiles, cement, and certain TV sets.
*Sin Goods at 40%:*
➤ Special higher rate of 40% levy will apply to sin goods to discourage consumption and increase tax revenues.
* Special Rates:*
➤ Diamonds at 0.25% and jewellery at 3% are likely to continue to promote specific industries.
*GST on Insurance & Health:*
➤ Major reforms on health and insurance GST are under consideration.
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* Revenue Contribution Snapshot*
➤ *18% slab*: Contributes 65% of total GST revenue.
➤ *12% slab*: Contributes 11%.
➤ *28% slab*: Contributes 18%.
➤ *Others (including 0.25%, 1%, 3%, compensation cess):* About 5%.
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*Impact on Taxpayers & Businesses*
➤ *Consumers*: Likely relief as items in 12% and 28% slabs move into 5% or 18%, reducing costs.
➤ *Businesses*: Simplification reduces disputes and compliance burdens, especially for FMCG and consumer durables.
➤ *Government*: Expected improvement in compliance, with a more rationalized structure aiding revenue predictability.
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*Expert View*
> A senior government official noted:
_“We have suggested a very simple, well-reformed next-generation GST. Broadly, tax incidence will come down because rates on bulk of items in 12% and 28% slabs will reduce. The aim is to move 99% of mass-use items into the 5% to 18% bracket_.”
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*Conclusion*
The proposed GST 2.0 is set to be one of the most comprehensive overhauls since the tax’s launch in 2017. If approved by the GST Council, it will eliminate complexities, lower tax incidence on common goods, and maintain higher levies only for luxury and sin goods.
This reform could mark a turning point in India’s indirect tax regime, making it simpler, fairer, and more predictable for all stakeholders.
By: via AlliesFinServe #StockMarket #Bharat Telegram.me/AlliesFin
