Two-rate GST wins ministers' nod, setting stage for tax relief

A range of goods from cars to kitchenware may turn cheaper in the near future, with a top panel of state ministers green-lighting a proposal to simplify India's indirect tax system.

- Gireesh Chandra Prasad

A ministerial panel formed by the Goods and Services Tax (GST) Council endorsed the Centre's proposal for a simplified tax structure on Thursday, setting the stage for its rollout before the coming festive season.

Currently, GST is applied in four slabs - 5%, 12%, 18% and 28%.

Plus, there is a cess levied on luxury items and so-called sin goods like tobacco and caffeinated beverages.

The plan approved on Thursday envisages scrapping the 12% and 18% slabs.

This will involve shifting most items in the 12% slab to 5%, and most of the products in the 28% slab including some automobiles to 18%.

Insulin, condensed milk, preserved fish and vegetables, granite and marble, tableware and kitchenware and certain pharmaceutical products are among the products that will move from 12% to 5%.

Sin goods and 'super luxury vehicles' may be part of a new 40% slab.

Top-end SUVs could still benefit from lower tax burden, since the cess applicable on the 28% slab will come to an end.

However, discussions are on for a new duty on sin goods like tobacco, which are also expected to move from the 28% slab plus cess at present to the proposed 40% slab without the cess, so that the tax incidence on them remains the same after the tax rate recast.