In the most significant reform since its rollout, India's Goods and Services Tax (GST) is set for a major overhaul, dubbed ‘GST 2.0.’ The new blueprint proposes to eliminate the current 12 per cent and 28 per cent tax slabs, aiming to simplify the system and reduce disputes. This plan will first be reviewed by state finance ministers before being presented to the GST Council.
Under the new proposal, the 5 per cent slab will remain for essential goods. Most items currently at 12 per cent are expected to be moved to the nil or 5 per cent bracket. This means items like jams, fruit juices, medicines, and stationery will likely see tax relief. Goods currently in the 28 per cent category - such as air conditioners, dishwashers, and cement - will shift to an 18 per cent slab. Sin and luxury goods, including tobacco and aerated drinks, will be subject to a special levy of up to 40 per cent.
Officials stated, products consumed by the middle class, like refrigerators and high-end TVs, will stay at 18 per cent. Special rates on items like diamonds and jewelry will continue to support those specific industries. The restructuring comes ahead of the March deadline when the compensation cess to states is set to expire.
This change is expected to make the tax structure less complex, improve compliance, and resolve long-standing disputes over product classifications. While the 18 per cent slab currently generates 65 per cent of GST revenue, the new structure aims to balance revenue without placing a heavier burden on consumers. The weighted average GST rate, currently 11.6 per cent, may even fall further.
